In a recent meeting with international rating agencies and global investors, State Bank of Pakistan (SBP) Governor Jameel Ahmad outlined Pakistan’s favorable economic trajectory, highlighting a notable improvement in macroeconomic indicators. The briefing, conducted on the sidelines of the 2024 IMF-World Bank annual meetings in Washington, D.C., gathered participants from major global financial institutions, including Standard Chartered, JP Morgan, Bank of America, and Jefferies. Governor Ahmad’s presentation emphasized the country’s strides in economic stabilization, driven by both the SBP’s prudent monetary policies and the government’s fiscal efforts.
Governor Ahmad presented a compelling picture of Pakistan’s economic stabilization measures over the past year. He noted that SBP’s monetary policies and fiscal consolidation efforts have contributed significantly to restoring macroeconomic stability, particularly in challenging global conditions. These stabilization measures are yielding results, he said, with economic recovery well underway. Ahmad acknowledged, however, the various global challenges that affect emerging economies like Pakistan, underscoring the importance of tough but necessary policy decisions to navigate these issues effectively.
A key focus of the Governor’s presentation was the declining inflation rate, which has shown a marked decrease since peaking at 38 percent in May 2023. According to Ahmad, inflation fell to 6.9 percent year-on-year by September 2024, while core inflation has also decreased noticeably in recent months. This disinflationary trend, attributed to broad-based economic policies, demonstrates Pakistan’s resilience against the global inflationary pressures that impacted many economies over the past year.
Ahmad highlighted the improvements in Pakistan’s external account, which has been a significant challenge for the country. Over the past year, foreign exchange reserves have strengthened notably, supported by stable current account levels and financial inflows. While imports have increased, particularly non-oil imports, and repatriation of profits by foreign investors has resumed, Pakistan’s current account deficit has remained within manageable limits. This improvement has been buoyed by strong growth in exports and steady remittances from Pakistani workers abroad, both of which have played a crucial role in maintaining a favorable balance of payments.
From a low of $3.1 billion at the end of January 2023, SBP’s foreign exchange reserves have risen to $11 billion as of October 11, 2024. Governor Ahmad stated that the SBP is targeting a further increase in foreign exchange reserves, aiming to reach $13 billion by June 2025. This growing buffer is expected to contribute to economic stability by alleviating external pressures and building investor confidence in Pakistan’s ability to meet its financial obligations.
Looking forward, the Governor underscored the importance of a structural reform agenda supported by both multilateral and bilateral partnerships. Under the new IMF program, Pakistan is pursuing a home-grown reform package designed to foster sustainable growth and economic resilience. Governor Ahmad shared the SBP’s strategic plan for 2024-2028, a comprehensive framework that prioritizes price stability, expansion of foreign reserves, and development of a robust digital financial ecosystem to align with modern banking needs.
The SBP’s long-term strategy places particular emphasis on digital transformation within Pakistan’s financial system. With a focus on innovation and inclusion, the strategic plan aims to create a more accessible financial environment, promoting broader adoption of digital banking services. Ahmad highlighted the role of an inclusive digital ecosystem as essential to reaching underserved populations and enhancing the efficiency and stability of the financial sector.
The Governor’s remarks were well received by investors, with many acknowledging the strides Pakistan has made in managing economic pressures and fostering a stable environment for investment. His presentation emphasized Pakistan’s path toward a sustainable economic model, emphasizing ongoing reform initiatives and structural adjustments that are essential to addressing long-term challenges. The combination of prudent monetary policy, fiscal consolidation, and targeted structural reforms positions Pakistan as a resilient emerging market, better equipped to handle global economic headwinds.
This outlook, coupled with the ambitious reserve targets and digital transformation plans, reflects Pakistan’s commitment to fostering economic resilience and sustainable growth. With support from international financial institutions and committed domestic policies, Pakistan is positioning itself as a stable and attractive market for global investors, indicating a positive outlook for the year ahead.