Pakistan's Economy on the Path to Sustainable Growth, Says Governor Jameel Ahmad

Strategic Insights -

The State Bank of Pakistan (SBP) Governor Jameel Ahmad has emphasized the central bank's commitment to structural reforms, laying the groundwork for sustainable and inclusive economic growth. Speaking at the launching ceremony of the Women Entrepreneurs Finance Code, jointly organized by SBP and the Asian Development Bank (ADB), Ahmad highlighted the importance of women's economic empowerment. He noted that the government and SBP are taking a cautious approach to transitioning from economic stability to medium-term economic transformation, with a focus on structural reforms.

Key Takeaways:

  • The average headline inflation has declined to 4.5% in FY25, the lowest level in nine years, due to a prudent and coordinated mix of monetary and fiscal policies.
  • The foreign exchange market remains stable, driven by external account outperformance and a high-quality buildup of forex reserve buffers, with SBP's reserves almost five times higher than the low levels witnessed 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 the ongoing economic recovery.
  • Fiscal policy has proactively supported monetary tightening, resulting in the second consecutive primary surplus in FY25, with tax and non-tax revenues showing sizable growth, while overall expenditures have remained relatively contained.
  • The government is targeting a higher primary surplus for FY26, contributing to economic growth showing signs of gradual, consistent, and sustainable recovery.
  • Unlike previous episodes of boom-bust cycles, the current policy mix is conducive to a lasting increase in economic activity rather than a short-sighted, fragile, and populist "sugar rush".

Statistics:

  • Average headline inflation: 4.5% in FY25 (Source: State Bank of Pakistan)
  • Foreign exchange reserves: Almost five times higher than the level at the start of 2023 (Source: State Bank of Pakistan)
  • Current account balance: Projected to remain supportive, driven by robust remittances and resilient exports (Source: State Bank of Pakistan)
  • Primary surplus: Second consecutive surplus in FY25 (Source: State Bank of Pakistan)
  • Economic growth: Showing signs of gradual, consistent, and sustainable recovery (Source: State Bank of Pakistan)

Sources:

  • State Bank of Pakistan (SBP)
  • Asian Development Bank (ADB)
  • Government of Pakistan