SBP raises policy rate to 12%: what it does to your loan installments
What happened
The State Bank of Pakistan's Monetary Policy Committee raised the policy rate by 50 basis points to 12% on 26 October 2026, effective 27 October, with nine of ten members voting for the rise. It was the first increase after three consecutive meetings without a change. The SBP cited the Middle East conflict keeping energy prices high, wheat supply frictions, and September inflation of 10.3%. Money markets then repriced: on 29 October the 1-year KIBOR offer rate was 13.04% (the bid was half a point lower), against 12.78% on 13 October, with the 3-, 6- and 12-month tenors all above the policy rate — a sign lenders were not pricing in a quick cut. By 10 November the 1-year KIBOR offer had eased to 12.89% (bid 12.39%). Since then, October inflation came in at 9.6% (from 10.3%), with core inflation easing in urban areas to 7.8%, though motor fuel was still about 41% dearer than a year earlier. Petrol prices have fallen sharply over the past week (PKR 338.00/L on 11 November), which, if sustained, would ease one of the pressures the SBP pointed to. Reports put the next scheduled MPC meeting at 14 December 2026. KIBOR is the benchmark most variable-rate consumer financing is priced against, so it's the number that actually reaches your installment.
Why it matters
Most car and personal loans in Pakistan are quoted as 'KIBOR + a spread'. When KIBOR moves — even without a policy rate change — your installment on a variable-rate loan moves with it at the next reset. A fixed-rate product locks you out of both the risk and the benefit.
Who is affected
- Anyone on a KIBOR-linked car or personal loan
- Buyers deciding between fixed and variable financing now
- Savers, who see the flip side in deposit and savings rates
| SBP policy rate | 11.5% | 12% | |
| 1-year KIBOR (offer, 29 Oct → 10 Nov) | ≈ 13.04% | ≈ 12.89% | |
| Headline CPI (Sep → Oct) | 10.26% | 9.61% |
How a half-point move in the benchmark reaches a car loan
Illustrative: PKR 2,500,000 over 5 years at KIBOR + 3.0%, variable
| Item | Before | After |
|---|---|---|
| At 1-yr KIBOR ≈ 12.89% | — | ≈ PKR 60,650/mo |
| If KIBOR rises 0.5 point to ≈ 13.39% | ≈ PKR 60,650/mo | ≈ PKR 61,315/mo▲ +PKR 665/mo |
| Rate type trade-off | Fixed = certainty | Variable = moves with KIBOR |
Illustrative estimate. Confirm the exact markup and reset terms with your bank before signing.
KIBOR and policy rates sourced from SBP monetary policy announcements.
Last verified: 11 November 2026 · About our data
Frequently asked questions
What is the SBP policy rate right now?
The State Bank of Pakistan's policy rate is 12%, raised by 50 basis points at the 26 October 2026 monetary policy announcement and effective 27 October. The 1-year KIBOR offer rate was about 12.89% on 10 November, down from 13.04% on 29 October. Reports put the next scheduled meeting at 14 December 2026.
How does the policy rate affect my car loan?
Variable-rate loans are usually priced as KIBOR plus a bank spread. When KIBOR changes, your installment adjusts at the next reset. Fixed-rate products stay the same regardless of KIBOR.
You might also need
More finance insights
FBR salary tax slabs 2026-27: what changed and your new take-home
The complete 8-slab FBR table for 2026-27, the abolished 9% surcharge, and what the new bands mean for your monthly withholding.
House construction cost in 2026: what a grey structure runs per sq ft
Grey-structure rates span roughly PKR 2,300/sq ft (Economy) to PKR 3,450/sq ft (Premium/A+). Here's how tier choice swings the cost of a 5-marla house.
Car financing in Pakistan: the SBP rules that decide what you can borrow
Two things decide your car financing: an SBP cap on how much anyone can borrow in total, and the spread your bank adds over KIBOR. Here's how both work.