Karachi – October 28, 2025: The Institute of Cost and Management Accountants of Pakistan (ICMA) has cautioned that the country’s monetary policy has “reached its limit” in addressing inflation, emphasizing the need for decisive fiscal and structural actions to curb persistent price pressures and support industrial recovery.
In its latest Monetary Policy Review, ICMA’s Research and Publications Department observed that Pakistan’s current inflation trend is largely supply-driven, originating from rising food, energy, and housing costs rather than excess demand. It noted that maintaining the policy rate at 11 percent would have limited impact on reducing inflation but would continue to dampen industrial activity, discourage investment, and slow job creation.
The ICMA analysis highlighted that the real interest rate is already moderately positive, providing adequate monetary restraint to anchor inflation expectations, but it is ineffective in stimulating real economic growth without an effective fiscal policy, as the inflationary pressures are mostly cost-push dominant in nature.
The Institute called for complementary fiscal and structural measures to work alongside monetary stability. These include rationalizing energy tariffs, improving food supply chains, facilitating essential imports, and exercising fiscal discipline to stabilize production costs and contain supply-side inflation.
ICMA also underscored the importance of close coordination between the State Bank of Pakistan and the Ministry of Finance to ensure coherent policymaking that maintains price stability while fostering economic growth.
To revive industrial momentum and ease financing pressures, ICMA recommended a measured reduction of 100 basis points in the policy rate during the next review, along with targeted fiscal relief for cost-pushing sectors through lower energy costs and simplified taxation.
Concluding its review, ICMA stressed that monetary policy can contain inflation expectations for the short term, but in the long run fiscal measures are needed to prevent supply shocks and repair structural issues. It called for a balanced mix of fiscal discipline, monetary prudence, and structural reforms to restore business confidence, attract investment, and place Pakistan’s economy on a sustainable growth path.
