# Pakistan's treasury-bill yields stay above the 11.5% policy rate as emergency rule tightens Islamabad's hold on Khan's home province

Troops have surrounded Khyber Pakhtunkhwa after the elected government was suspended. The World Bank rates its two Pakistan loan programs as carrying "substantial risk."

- Published: 2026-10-15T05:13:03.263Z
- Canonical: https://polylog.news/2026-10-15/pakistan-s-treasury-bill-yields-stay-above-the-11-5-policy-r
- Publisher: Polylog (Global desk)
- Section: world
- Sources: [BBC News Hindi](https://www.bbc.com/hindi/articles/ckp8gvgl6g3mo?at_medium=RSS&at_campaign=rss), [Dawn](https://www.dawn.com/news/2037216/govt-keeps-treasury-bill-returns-higher-over-policy-rate), [Dawn](https://www.dawn.com/news/2037220/world-bank-sees-moderate-progress-in-pakistans-tax-reforms)

Pakistan's government kept treasury-bill rates nearly unchanged at an auction on Wednesday, [Dawn reported](https://www.dawn.com/news/2037216/govt-keeps-treasury-bill-returns-higher-over-policy-rate). Yields on every maturity stayed above the State Bank of Pakistan's 11.5% policy rate. It was the last auction before the central bank's next monetary policy decision. When short-term government debt yields more than the policy rate, investors are usually signaling that they expect the policy rate to rise, not fall.

The auction took place amid a political crisis. President Asif Ali Zardari declared a state of emergency in Khyber Pakhtunkhwa and [suspended the provincial government](https://www.npr.org/2026/10/13/nx-s1-5998798/pakistan-imposes-emergency-rule-in-former-prime-ministers-stronghold) led by Imran Khan's Pakistan Tehreek-e-Insaf (PTI) party. Authorities [detained Chief Minister Sohail Afridi](https://www.thenationalnews.com/news/2026/10/13/pakistan-detains-imran-khan-ally-in-stronghold-province/) and some of his cabinet. The federal government says the provincial administration failed to contain an Islamist insurgency on the Afghan border. PTI says the real aim is to stop Khan's supporters from marching on Islamabad to demand his release from prison.

[BBC News Hindi](https://www.bbc.com/hindi/articles/ckp8gvgl6g3mo?at_medium=RSS&at_campaign=rss) reported that the army has surrounded Khan's stronghold and asked, in its headline, whether Pakistan is taking a serious risk. The BBC quoted analysts who argue that the confrontation with Khan's supporters may increase instability rather than reduce it.

Lenders are watching too. The World Bank rated its two Pakistan loan programs, worth about $670 million, as ["moderately satisfactory" with "substantial risk"](https://www.dawn.com/news/2037220/world-bank-sees-moderate-progress-in-pakistans-tax-reforms), Dawn reported. The programs aim to support economic stability and raise tax collection relative to gross domestic product.

## What this means

Pakistan imports most of its oil, so Brent above $100 strains its current account and currency. The treasury-bill auction shows investors already demanding more than the policy rate, suggesting they expect tightening, or doubt rates can stay where they are. The political crackdown adds a second layer of risk: unrest in a frontier province bordering Afghanistan, at a time when multilateral lenders already rate their programs there as high-risk. Pakistani rupee assets and the country's dollar bonds are exposed, as are reforms that depend on provincial tax cooperation. The army can control the streets, but it cannot fix the balance of payments. The precedent is the unrest that followed Khan's arrest in May 2023, which preceded a sharp fall in the rupee and emergency International Monetary Fund support. Our forward read: the State Bank is more likely to hold or raise rates than to cut at its next decision, and spreads on Pakistan's dollar bonds are likely to widen over the next several weeks if the emergency in Khyber Pakhtunkhwa leads to clashes. A negotiated end to the emergency, combined with lower oil prices, would prove this wrong.

## What to watch

- The State Bank of Pakistan's coming rate decision. A hike would confirm that oil-importing central banks are turning back to tightening.
- Whether PTI supporters resume the march toward Islamabad. Large clashes would raise the risk premium on Pakistani assets.