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Economic growth

Pakistan's Economy on the Path to Sustainable Growth: Key Insights from SBP Governor

Strategic Insights

— 1 min read

Governor State Bank of Pakistan (SBP) Jameel Ahmad emphasized the need for structural reforms to achieve sustainable and inclusive economic growth, speaking at the launch ceremony of the Women Entrepreneurs Finance Code joint initiative with the Asian Development Bank (ADB). He highlighted the government's resolve to transition from economic stability to medium-term economic transformation, citing prudent monetary policy, a fundamentals-aligned exchange rate, and fiscal consolidation as key drivers of overall macroeconomic stability.

Key Takeaways:

  • The average headline inflation in Pakistan has declined to 4.5% in FY25, the lowest level in the last nine years, with a target range of 5-7%.
  • The FX market remains stable, driven by external account outperformance and a high-quality buildup of FX reserve buffers, with SBP's FX reserves now almost five times higher than the low levels at the start of 2023.
  • The current account balance is projected to remain supportive, driven by robust remittances and resilient exports, despite rapid growth in both the value and volume of imports in line with ongoing economic recovery.
  • Fiscal policy has proactively supported monetary tightening, as reflected in the second consecutive primary surplus in FY25.
  • Overall expenditures have remained relatively contained, while both tax and non-tax revenues have shown sizable growth, with the GOP targeting a higher primary surplus for FY26.
  • Economic growth is showing signs of gradual, consistent, and sustainable recovery, with a lasting increase in economic activity rather than a short-sighted "sugar rush" expected.
  • The adoption of the Women Entrepreneurs Finance Code is expected to support women-owned businesses and contribute to inclusive economic growth.

Statistics:

  • Average headline inflation: 4.5% in FY25
  • Lowest level in the last nine years
  • Target inflation range: 5-7%
  • FX reservations: Almost five times higher than the low levels at the start of 2023
  • Current account balance: Projected to remain supportive, driven by robust remittances and resilient exports
  • Primary surplus in FY25: Second consecutive primary surplus
  • Tax revenues: Showing sizable growth
  • Non-tax revenues: Showing sizable growth
  • Overall expenditures: Remaining relatively contained
  • Economic growth: Showing signs of gradual, consistent, and sustainable recovery

Sources:

  • Governor State Bank of Pakistan (SBP), Jameel Ahmad
  • Asian Development Bank (ADB)
  • Government of Pakistan (GOP)

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