Pakistan’s central bank has issued a clear message on steering the economy with caution, determined not to fall into the familiar pattern of abrupt expansions followed by painful corrections. Speaking at the launch of the Women Entrepreneurs Finance Code in Karachi, State Bank of Pakistan Governor Jameel Ahmad emphasized that Pakistan will not repeat past mistakes of driving demand and economic growth too aggressively, which have previously triggered unsustainable boom-bust cycles.
The SBP chief expressed strong confidence that the country’s ongoing shift from a phase of hard-earned stabilization to economic growth will prove more durable than in prior episodes. This optimism is anchored by robust improvements across key economic indicators. Notably, Pakistan’s foreign exchange reserves held by the central bank have witnessed a remarkable turnaround, surging fivefold to reach $14.5 billion by mid-2025 from under $3 billion at the start of 2023. Ahmad highlighted that this reserve accumulation is rooted in SBP’s strategic purchases from local currency markets, rather than piling up external borrowings as was common practice between 2015 and 2022.
Inflation dynamics have also improved significantly, with headline inflation dropping to a nine-year low average of 4.5 percent in the fiscal year 2024-25. The SBP governor conveyed growing confidence that a disciplined mix of monetary and fiscal policies would keep inflation anchored within the 5 to 7 percent target range. Meanwhile, the exchange rate remains relatively stable, and the current account has swung into a surplus, driven by healthy remittances and resilient exports, even as imports have picked up alongside the broader economic recovery.
Ahmad underscored that Pakistan’s economic rebound is showing signs of being gradual and structurally stronger this time. He cautioned against pursuing a short-term surge that could once again destabilize the macroeconomic environment. “The period of stabilization has often been followed by a boom-bust cycle. To avoid repeating these patterns, it is crucial not to accelerate demand and economic growth too rapidly, especially in inward-looking sectors,” he said.
Unlike previous cycles characterized by swift yet fragile recoveries, Ahmad pointed out that the current policy approach is tailored to support steady expansion. Fiscal policy has proactively complemented monetary tightening, evidenced by a second consecutive primary budget surplus in fiscal year 2025. Tax and non-tax revenues have grown considerably, while overall expenditures have been kept under control, enabling the government to target an even higher primary surplus for fiscal year 2026.
Looking ahead, the focus is now shifting toward long-needed structural reforms aimed at broadening the tax base, privatizing state-owned enterprises, and liberalizing trade. These measures are expected to drive efficiency, boost private sector participation, and enhance competitive dynamics within the economy.
Ahmad’s comments came alongside the launch of the Women Entrepreneurs Finance Code, an initiative backed by the SBP in partnership with the Asian Development Bank through a $500 million program to empower women-led businesses. This initiative has garnered support from 20 banks and financial institutions, as well as the World Bank, signaling a multi-pronged effort to embed inclusivity and resilience into Pakistan’s financial ecosystem.
As Pakistan charts this critical path forward, the SBP’s message is clear: sustainable growth must be rooted in careful, coordinated policies that avoid the pitfalls of past cycles. With strong reserves, contained inflation, and a renewed reform agenda, the groundwork appears set for a more stable economic trajectory.