Pakistan’s economy is showing signs of renewed stability, with the State Bank of Pakistan (SBP) projecting gross domestic product (GDP) growth between 3.25 percent and 4.25 percent for fiscal year 2026. The projection, shared by SBP Governor Jameel Ahmad, reflects the country’s progress in overcoming a series of financial shocks over the past three years.
Speaking at the annual meeting of the Pakistan Textile Council (PTC) in Karachi, Governor Ahmad presented an overview of the nation’s macroeconomic trajectory. He highlighted the significant strides made since 2022, a period marked by depleting reserves, soaring inflation, and sharp policy tightening. Foreign exchange reserves, which had fallen to $2.8 billion in early 2023, now stand at $14.3 billion. This turnaround has eased external financing pressures and restored confidence in the country’s ability to manage its balance of payments.
The governor also underscored the resilience of Pakistan’s remittance flows, which climbed to over $38 billion in FY2025. A large portion of these inflows transitioned from informal to formal banking channels, strengthening the transparency and reliability of the country’s financial system. The narrowing of the current account deficit has further reduced vulnerabilities, enabling the SBP to ease monetary policy.
Inflation, which had spiraled into double digits, recorded a dramatic decline to 3.2 percent by June 2025—the lowest in decades. This progress allowed the central bank to slash the policy rate from 22 percent to 11 percent within a year. According to Ahmad, these achievements are the result of fiscal consolidation, reforms in exchange companies, and a cautious approach to debt management. He assured that inflation will be kept within the target range of 5 to 7 percent going forward, with reserve accumulation and stability at the core of SBP’s policies.
While the central bank highlighted these improvements, the Pakistan Textile Council emphasized the urgency of structural reforms to strengthen export competitiveness. PTC Chairman Fawad Anwar noted that despite macroeconomic stabilization, exporters continue to face challenges that hinder their ability to seize opportunities in global markets.
He pointed to the exclusion of key raw materials from the Export Facilitation Scheme (EFS), which has raised costs for manufacturers. Anwar called for the withdrawal of duties on these inputs, a reduction in sales tax to 3–5 percent with full refunds, and the implementation of a uniform 1 percent duty drawback scheme for all exporters. He further stressed the importance of subsidized financing to mitigate the burden of rising wages and energy costs.
“Textiles and apparel remain the backbone of Pakistan’s economy, and global demand trends present a once-in-a-decade chance to increase our market share. Without bold policy support, we risk losing ground to competitors,” Anwar warned.
The discussion concluded with an agreement between SBP and PTC to continue dialogue, particularly on renewable energy financing and concessional export credit schemes. Both sides acknowledged that a stronger export sector, particularly textiles, must remain central to Pakistan’s economic strategy in the years ahead.
As Pakistan heads into FY2026, the challenge will be to maintain macroeconomic stability while creating an enabling environment for industries to thrive. The SBP’s projections signal cautious optimism, but sustaining growth will depend heavily on aligning fiscal and trade policies with the needs of the country’s most critical sectors.
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