Pakistan’s average inflation to remain between 5.5-7.5% during FY25— central bank

KARACHI: Pakistan’s central bank reduced its key policy rate by 100 basis points to 11% on Monday, resuming a series of cuts that brought the rate down from a record high of 22% after a brief pause in March.
Nine of 14 analysts surveyed by Reuters expected the central bank to cuts its key rate, with three expecting a 50 bps cut and two calling for a 100 bps cut.
The decision came in the backdrop of soaring tensions with neighboring India following a deadly attack on tourists in Indian-administered Kashmir. The nuclear-armed neighbors have announced a raft of punitive steps that aim to hurt each other economically.
It also comes ahead of an imminent International Monetary Fund (IMF) decision on releasing Islamabad’s next tranche of $1 billion from its $7 billion bailout program.
The bank had cut the rate by 1,000 basis points since June from an all-time high of 22% before a surprise decision to hold it in March, citing the risk of price rises including from increased US tariffs.
The inflation rate fell to 0.3% in April, its lowest in roughly a decade and below finance ministry estimates of 1.5% to 2%. The central bank forecasts average inflation to be in the range of 5.5% to 7.5% for the fiscal year ending June.
Pakistan’s manufacturing sector growth slowed to a seven-month low in April, with the HBL Pakistan Manufacturing Purchasing Managers’ Index (PMI) easing to 51.9 from 52.7 in March, as concerns over global trade weighed due to the impact of US President Donald Trump’s tariff announcements.
New orders slumped while export orders in particular plummeted. Employment fell for a second month as firms cut costs.

ISLAMABAD: Pakistan continues to engage foreign capitals and friendly nations as tensions simmer with India over an attack in Indian-administered Kashmir that killed 26 tourists on April 22, with the two nuclear-armed neighbors taking a raft of punitive measures against each other.

India has blamed Pakistan for the attack in Pahalgam resort town. Islamabad has denied involvement and asked for evidence which New Delhi has so far not publicly shared.  Both countries have since exchanged gunfire in Kashmir, taken diplomatic measures against each other, expelled citizens and ordered the border shut.

Amid soaring tensions, Iranian Foreign Minister Seyyed Abbas Araghchi arrived in Pakistan on Monday for discussions on bilateral ties and regional developments, days after Pakistani Prime Minister Shehbaz Sharif postponed his scheduled visit to Malaysia.

Separately, British High Commissioner Jane Marriott met Sharif at his office, where the prime minister shared Pakistan’s perspective on the prevailing situation in South Asia. Pakistan's Interior Minister Mohsin Naqvi is also on a visit to Gulf countries, including Oman and Qatar, where he is expected to brief the Gulf leaders on Pakistan's stance.

"We will demonstrate patience, we will exercise full restraint and we will not be the first one to take any escalatory move," Pakistan's Deputy Prime Minister Ishaq Dar told reporters in Islamabad, following his meeting with the Iranian FM Araghchi.

"However, if India takes any adventure, any escalatory move, then we will give a befitting reply. So, that's where we stand."

Dar said Pakistan had nothing to do with the Pahalgam incident, reiterating PM Shehbaz Sharif's offer for a credible international probe into the April 22 attack.

"Our offer is very much there," he added.

In his meeting with FM Araghchi, PM Sharif shared Pakistan’s concerns over the prevailing tensions in South Asia as a result of India’s "provocative behavior" since the Pahalgam attack, according to Sharif's office.

"He categorically rejected any attempts to link Pakistan to the incident, without sharing any evidence," Sharif's office said. "He also stressed that India’s weaponization of the Indus Waters Treaty was unacceptable and a redline for the people of Pakistan."

India suspended the 1960 World Bank-mediated treaty a day after the Pahalgam attack, saying the suspension would last until "Pakistan credibly and irrevocably abjures its support for cross-border terrorism." Pakistan has described the suspension of treat as an "act of war."

The flare-up and exchanges of small arms fire between India and Pakistan across their de facto border in Kashmir has alarmed world and regional powers, who have called for restraint and urged the two neighbors to resolve the crisis through dialogue. Pakistan has assured foreign capitals and friendly nations that it would not be the first one to strike, according to officials.

In his meeting with British High Commissioner Marriott, Sharif urged the United Kingdom, which enjoys good relations with both Pakistan and India, to play its part in de-escalating the situation.

"The British high commissioner thanked the prime minister for sharing Pakistan’s position and said that the UK would work closely with Pakistan and India for maintaining regional peace and security," Sharif's office said.

Also on Monday, Interior Minister Naqvi met his Qatari counterpart Sheikh Khalifa bin Hamad bin Khalifa Al-Thani and briefed him on the prevailing regional situation.

"Pakistan has always rejected the policy of aggression. India has been offered an independent and impartial investigation into the Pahalgam incident, the truth about the incident should come before the world as to who is really responsible for it," Naqvi was quoted as saying by his ministry.

"Making baseless and illogical accusations against Pakistan is tantamount to ignoring our great sacrifices in the war against terrorism."

Pakistan and India have a history of bitter relations. They have fought two of their three wars over Kashmir, a region split between them, since gaining independence from the former British colonial rule in 1947.