KARACHI:

The Monetary Policy Reports (MPRs) published by the State Bank of Pakistan (SBP) try to show the SBP’s intention of transitioning towards a more up-to-date, inflation-targeting framework where the central bank’s timely information sharing becomes crucial. The SBP attempts to pivot towards global best practices by including improved visuals, heat maps, fan charts and narrative framing. However, if one looks underneath all these so-called improved information-sharing methods, the finding is that not much has changed. The existing communication methodology is being reused and repackaged rather than reformed.

The two recent MPRs illustrate this clearly. The reports, at first glance, appear to be all-encompassing as they contain analysis of global developments and national patterns, and try to provide forecasts for essential macroeconomic indicators. However, a closer look, especially at the tables and figures, reveals that these documents remain largely unchanged from annual and quarterly reports of the SBP and, more importantly, are backwards-looking in nature.

Both reports devote ample space to describing what has already transpired, such as past inflation rates, the story about current account stabilisation, growth rates and easing global commodity prices. They do little towards providing in-depth forward-looking content. Projections are few and far between, and usually in broad ranges. For example, the report reads: ‘inflation is expected to remain between 5-7%,’ ‘growth is projected between 3.75-4.75%,’ ‘the current account deficit is expected to be 0-1% of GDP,’ etc. These are informative, sure, but lack precision and, above all, transparency. Such lapses are common in SBP’s work, for example, implementation of the interest rate corridor by SBP in August 2009 with officially stated purpose ‘minimise volatility in the weighted-average overnight re-purchase rate’ rather than to transition from monetary aggregate targeting towards inflation targeting regime. What’s ironic is that more than a decade later, the MPRs suggest that this transition remains incomplete. We essentially have an ‘inflation targeting lite’ with an undefined future.

What is missing is the central forecast path which includes the actual trajectory of inflation, real output, interest rates and the exchange rate that underpins policy decisions. Modern central banks across the globe not only provide mere ranges but publish detailed, projection-oriented outputs from structural or semi-structural models. These projections are backed by defined assumptions such as exchange rates, oil prices and interest rate paths. The SBP’s approach is much more selective. The August 2025 MPR clearly indicates that movements in future markets are included in its oil price assumption. These assumptions are updated in the February 2026 MPR, where the expected oil price per barrel is lowered to $65 from $70, as assumed for fiscal year 2026. However, the exchange rate, a far more critical variable in Pakistan’s inflation dynamics, is not disclosed at all.

It is rather difficult to justify this omission because Pakistan’s economic performance is highly sensitive to changes in exchange rates. Either the SBP is unaware that instruments exist which can shed light on the state of the exchange rate situation, or it intentionally does not want Pakistanis to know where it forms its exchange rate assumptions for policy decisions. Whatever the case, it is informed to readers that Pakistan has an active over-the-counter forward market, where exchange-traded futures contracts for Pakistani Rupee to US Dollar (PKR/USD) are available internationally. Regarding monetary policy reports, no such information is provided about the exchange rate path assumed in the forecasts made by the SBP for the medium term and alternative paths, if any. This paints an incomplete picture. Readers are told where the economy is projected to go, not how it will get there. One of the major factors that define credible inflation-targeting banks is their willingness to evaluate the accuracy of past forecasts. Institutions such as the Bank of England and the Czech National Bank publish analyses of how their past projections compared with the current state of the economy. These banks are also willing to publish their mistakes and flaws and correct them, thus building trust with people, creating credibility, and indicating they are willing to accept responsibility for any mistakes made and move forward accordingly.

The MPRs of the SBP do not contain any formal process for assessing forecast accuracy. The report does not include any assessment of how precise past forecasts were, and it lacks both forecast error analysis and the reasons for outcome discrepancies. The absence of this element makes forecasts seem aspirational rather than analytical. No one in the public sphere is aware of econometrics/machine learning models used by the central bank for analysis that leads to Monetary Policy Committee (MPC) decisions. This must change as the data SBP uses, the software it subscribes to is the property of the people of Pakistan and not the SBP.

Furthermore, there is also a noticeable conflict between the tone and content of the reports. The MPR for February 2026 highlights macroeconomic stability, better growth prospects and increased resilience. However, within the same document, there is recognition of major risks, including tax revenue shortfalls, export vulnerabilities, global uncertainty and structural weaknesses. While this is not an outright contradiction, it certainly highlights a propensity for positive storytelling while downplaying major issues in less prominent parts of the document. Ultimately, it is not that the MPRs lack information. Quite the contrary, they provide a useful current overview of economic indicators and development while also highlighting important potential risks. The limitation is that they do not meet the criteria for a credible inflation-targeting regime. MPRs in their current form remain descriptive economic reports rather than data-oriented, model-driven policy documents used by advanced and leading emerging economies.

The SBP needs to increase the scope of its future MPRs if it wants to achieve its goal of switching to inflation targeting in real terms. The organisation needs to release explicit, model-based forecasts that contain details about the expected deviation of growth from its target, deviation of inflation from its target, exchange rate assumptions, oil price assumptions and policy rate path. The organisation needs to assess its previous forecasts and provide reasons for actual outcomes if deviations are high. The bank needs to move from telling stories through its narrative-driven communications to using a system that allows for complete openness of its current monetary policy decision-making process, including baseline and alternate scenario forecasts and policy path.

Until then, the monetary policy reports will continue to be seen for what they are: not genuine breaks from the past, but a refined continuation of past work (annual report, half-year, and quarterly state of the economy reports), disguised to look brand new but unfortunately unchanged in substance. This report is still in its early stages; therefore, an annexure with models, assumptions, outcomes, deviations and explanations can make them much more transparent and valuable.

DR ATEEB SYED IS A RESEARCH ANALYST AT UPSIDE AND A VISITING PROFESSOR OF ECONOMICS AT GRAND VALLEY STATE UNIVERSITY, ALLENDALE, MICHIGAN. HE IS ALSO A RESEARCH FELLOW AT CBER, IBA. ABDULLAH AZIZ IS A RESEARCH ASSISTANT AT THE ECONOMIC GROWTH AND FORECASTING LAB, IBA