During the 2024 IMF-World Bank annual meetings in Washington, DC, State Bank of Pakistan (SBP) Governor Jameel Ahmad provided global investors and international rating agencies with an optimistic outlook on Pakistan’s economic recovery and stability. Governor Ahmad’s meetings with representatives from prominent financial institutions, such as Standard Chartered, JP Morgan, Bank of America, and Jefferies, aimed to communicate Pakistan’s significant economic advancements over the past year, underpinned by policy reforms and fiscal adjustments.
Governor Ahmad highlighted the positive results of SBP’s disciplined monetary policy and the government’s concerted efforts toward fiscal consolidation, both essential factors in restoring macroeconomic stability. Acknowledging the economic headwinds faced by global and emerging markets alike, Ahmad discussed Pakistan’s rigorous stabilization measures and their measurable outcomes. These actions, according to the governor, have been pivotal in addressing and overcoming recent economic challenges and paving the way for sustained growth.
One of the major points of Ahmad’s address was the country’s progress in curbing inflation. He explained that inflation in Pakistan reached its peak at 38% in May 2023, subsequently showing a steady decline over recent months. As of September 2024, inflation stood at a manageable 6.9% year-on-year, with core inflation rates showing similar reductions. The SBP governor noted that the disinflationary trend has been broad-based, signaling a healthy adjustment in core economic indicators. This development not only aligns with Pakistan’s fiscal objectives but also signals a more predictable and stable pricing environment for consumers and businesses.
Another focus of the briefing was the substantial improvement in Pakistan’s external account, which has shown resilience despite increasing imports, especially in non-oil sectors. Governor Ahmad shared that the external current deficit has narrowed significantly and remains within manageable limits, owing to growth in exports and a steady rise in workers’ remittances. This improved trade balance has enhanced the country’s foreign exchange reserves, which surged from $3.1 billion in January 2023 to $11 billion by October 11, 2024. Strengthened foreign exchange buffers, he explained, provide a critical safeguard for the economy, allowing the SBP to maintain stability in the currency markets. The SBP aims to further enhance these reserves, targeting $13 billion by June 2025.
Governor Ahmad also outlined the government’s structural reform agenda, underscoring its essential role in achieving sustainable economic growth. Supported by both multilateral and bilateral partnerships under the new IMF program, this reform package is rooted in homegrown policy solutions and designed to foster long-term resilience. Ahmad detailed components of the SBP’s strategic plan for 2024-2028, which includes a focus on price stability, building up foreign exchange reserves, and advancing an inclusive and innovative digital financial services ecosystem. This five-year plan aims to modernize Pakistan’s financial landscape, meeting contemporary needs for an efficient and fair financial system.
As part of the SBP’s vision, digital banking and financial inclusion were highlighted as top priorities. Ahmad emphasized the necessity of creating a digital finance ecosystem that not only enhances accessibility for consumers but also supports financial stability and innovation. Such efforts are critical in developing a robust financial system that can effectively serve Pakistan’s diverse population, enabling better financial management and growth opportunities across all sectors.
In addition, the governor reported on the favorable developments in Pakistan’s public sector debt and gross external financing needs, both of which have decreased relative to GDP. This improvement has not only enhanced investor confidence but also contributed to the favorable economic projections for the current fiscal year. With economic activity gaining momentum, real GDP growth is expected to rise, signaling a positive trajectory for Pakistan’s economy.
Governor Ahmad concluded by expressing confidence in Pakistan’s economic direction, reaffirming the commitment of both the SBP and the government to their strategic policies and reform measures. These efforts aim to stabilize the economy, improve fiscal health, and create a conducive environment for sustainable growth.