Governor of the State Bank of Pakistan (SBP), Mr. Jameel Ahmad, engaged with key international investors during events hosted by global banks and financial firms, including JP Morgan, Citibank, and Jefferies. These interactions took place on the sidelines of the IMF-World Bank Spring Meetings in Washington DC.
Governor Ahmad highlighted substantial improvements in Pakistan’s macroeconomic outlook over the past year, attributing this progress to prudent monetary policy, fiscal consolidation, and key structural reforms. He shared that inflation in Pakistan has significantly declined, reaching a two-year low of 20.7 percent in March 2024, down from a peak of 38 percent in May 2023. This broad-based deceleration in inflation is a result of monetary tightening, fiscal consolidation, eased import supplies, improved agricultural output, and the base effect. Core inflation also saw a notable decrease, dropping to 15.7 percent in March after remaining above 20 percent throughout the previous year.
Governor Ahmad also addressed the stabilization of Pakistan’s external sector, evidenced by a sharp reduction in the current account deficit (CAD) to $1 billion during Jul-Feb FY24, compared to $3.8 billion in the same period last year. Contributing factors included stabilization policies, improved agricultural output leading to higher food exports, and reduced import demand for agricultural commodities like wheat and cotton. Workers’ remittances have shown consistent growth since October 2023, driven by incentives and regulatory measures promoting formal inflows. These improvements have enabled the SBP to more than double its foreign exchange reserves from $3.1 billion in January 2023 to around $8 billion by April 2024, despite the repayment of a $1 billion Eurobond. Additionally, the SBP’s forward liabilities have significantly reduced from $5.7 billion in January 2023 to $3.4 billion in February 2024.
Governor Ahmad underscored the improvement in Pakistan’s external debt dynamics, highlighting the reduced gross financing requirements due to the sizable CAD contraction. The maturity profile of external debt has improved, with a decline in costly short-term commercial loans and an increase in long-term concessional financing from multilateral agencies, supported by bilateral partners. He also noted the recent increase in inflows from overseas Pakistanis through Roshan Digital Accounts and other foreign investors, reflecting strong performance in meeting IMF SBA program targets and benchmarks. Looking ahead, the government is hopeful of securing a long-term IMF program to facilitate additional external financing and the adoption of structural reforms to address long standing economic issues.
Governor Ahmad emphasized SBP’s efforts to create a conducive macroeconomic environment for private sector investment. The SBP’s Strategic Plan 2028 aims to promote growth by achieving price and financial stability. Mr. Ahmad highlighted the widespread adoption of digital technologies to bridge gaps in access to financial services and revolutionize the domestic payments system. These time-bound reforms are expected to set Pakistan’s economy on a path of sustainable growth.