State Bank of Pakistan

Prime Minister Shehbaz Sharif directed the formulation of a comprehensive strategy to enhance small and medium-sized enterprises' (SMEs) access to financing, emphasizing collaboration with the State Bank of Pakistan and commercial banks. He also highlighted support for farmers processing agricultural produce, dedicated financial products for SMEs, and assistance for young and women entrepreneurs.

The State Bank of Pakistan (SBP) has abolished the Sohni Dharti Remittance Programme (SDRP) and Telegraphic Transfer Charges Incentive Scheme (TTCIS), effective July 1, 2026, following IMF scrutiny. The incentives, which cost up to Rs120bn annually, were discontinued to address concerns over non-performance-linked financial allocations. Banks will continue offering free remittance transfers to users despite the scheme’s termination.

The National Assembly Standing Committee on Finance approved 30 major amendments to the Finance Bill 2026, including tax collection reforms for imported mobile phones, mandatory digital production monitoring, and duty waivers for electric vehicles. The revised bill introduces tax stamps, barcodes for goods clearance, and algorithm-based dispute resolution, with final approval pending in the National Assembly.

The Supreme Court of Pakistan signed a tripartite agreement with the State Bank of Pakistan and 1LINK (Guarantee) Ltd to integrate digital payment solutions into judicial processes, replacing manual legal fee systems with electronic transactions to enhance efficiency and transparency.

The business community in Pakistan expressed disappointment over the State Bank of Pakistan's (SBP) decision to maintain the policy rate at 11.5%, urging a rate cut to support industrial recovery, exports, and investment. Organizations like the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and others argued that the unchanged rate hampers economic growth and competitiveness.

The State Bank of Pakistan maintained the policy rate at 11.5 per cent during its final policy review of FY26. The previous rate increase occurred on April 27, driven by geopolitical tensions in the Gulf, but analysts now note stabilized oil prices and improved supply chain conditions as reasons for keeping rates unchanged.

Pakistan has sustained a Ponzi finance system for 25 years by borrowing to pay interest on debt, with debt-to-GDP rising from 58% to 82% between 2012 and 2023. The scheme avoided collapse through captive lenders, inflation eroding debt value, and internal financial system transfers.

Pakistan's 2026-27 budget faces risks including a $40-per-barrel oil price increase adding 0.8pc to fiscal deficit, natural disasters threatening 1.5pc fiscal impact, tax exemptions causing 1.3pc budget losses, and state-owned entities draining 0.4pc. The finance ministry identified seven key fiscal vulnerabilities linked to global oil prices, GDP growth, revenue shortfalls, and climate impacts.

The State Bank of Pakistan's Monetary Policy Committee is unlikely to raise the policy rate in its June 15 meeting due to eased Gulf tensions and stable oil prices. The only rate hike in FY26 occurred on April 27, but analysts note improved supply chain conditions and prospects for a US-Iran deal have reduced inflationary pressures.

Pakistan recorded its highest-ever monthly remittance inflow of $4.3 billion in May, a 20.2% increase from April and 15.4% higher than May 2023. Saudi Arabia contributed the most at $1.025 billion, followed by the UAE, UK, and US. Experts note weaker growth compared to FY25 due to concerns over exchange rates and diverted inflows.

Islamic banking in Pakistan originated in 1979 with terminology changes like replacing 'interest' with 'mark-up', but critics argue it remains non-Islamic. Since 2002, it has grown with Sharia-compliance oversight and financial instruments like sukuks, Ijara, and Takaful. However, profit structures in Islamic banking still mirror conventional banks by tying to policy rates, raising questions about alignment with Quranic principles.

Pakistan's foreign exchange reserves are nearing $18 billion for FY26, but a widening trade deficit of $34.76 billion threatens reserves and remittances. Experts warn of a potential current account deficit, depreciation pressure on the rupee, and challenges from upcoming foreign debt payments.

Pakistan has received a $1 billion financial boost from Saudi Arabia, while the United Arab Emirates is seeking repayment of previous loans. The State Bank of Pakistan in Karachi is involved in these financial transactions.

Pakistan is engaging in discussions with Saudi Arabia and China following the UAE's recent loan initiative. The State Bank of Pakistan is involved in these financial negotiations.