SBP revises GDP growth upward up to 4.75%

KARACHI: The State Bank of Pakistan (SBP) Governor Jameel Ahmed on Monday presented an upbeat outlook for the economy, revising the GDP growth forecast upward ranging 3.75-4.75 percent for FY26, and indicated that SBP’s foreign exchange reserves are expected to reach an all-time high of USD 20.2 billion by the end of December 2026.

Addressing a press conference followed the Monetary Policy Committee (MPC), he informed that real GDP grew by 3.7 percent y/y in Q1 of FY26 as compared to 1.6 percent in the corresponding period last year (FY25), indicating a notable pickup in economic activity, mainly led by the industry and agriculture sectors.

Moreover, recent outturns of high frequency indicators (HFIs) suggest that this momentum continued in the second quarter of the current fiscal year.

READ MORE: Pakistan unlikely to achieve IMF’s projected 3.2% GDP growth, say experts

Auto sales, domestic cement dispatches, POL sales (excluding furnace oil), fertilizer off-take, and imports of machinery and intermediate goods recorded a notable growth, suggesting sustained domestic demand.

Consistent with these trends, LSM posted a growth of 8 percent y/y and 10.4 percent y/y in October and November 2025, respectively, raising cumulative LSM growth to 6 percent during July-November FY26, he added.

Meanwhile, in the agriculture sector, latest information on sowing and satellite imagery points towards encouraging prospects for the wheat, cotton and maize crop. These favourable developments in the commodity-producing sectors are expected to provide further impetus to the services sector.

In this context, the growth outlook has substantially improved from the earlier assessment and the SBP has revised the GDP growth target upward side. Real GDP growth is now projected in the range of 3.75-4.75 percent by end of FY26 up from the previous estimates of 3.25-4.25 percent, the governor said, adding that on average, this growth would mark Pakistan’s highest growth in the past 30 years, if achieved.

Jameel Ahmed said that the monetary easing began in June 2024 is now its positive results as becoming visible, noting that policy measures typically take six to eight quarters to translate into real economic activity. “Current economic momentum is likely to strengthen further in FY27, supported by the still-unfolding impact of the earlier reduction in the policy rate and on-going macroeconomic stability,” he added.

He informed that SBP’s FX reserves surpassed the end-December target, reaching USD 16.1 billion as of January 16, mainly led by SBP’s ongoing interbank FX purchases.

Meanwhile, sustained growth in workers’ remittances and ICT services exports helped not only in containing the current account deficit, but helped the SBP to build FX reserves mainly through purchases.

Based on this outlook and the realization of planned official inflows, SBP’s FX reserves are expected to surpass USD 18 billion by June 2026 as against the target of USD 17.5 percent.

In addition, SBP’s foreign exchange reserves will rise further in FY27 to reach at all time level of USD 20.20 billion by end of December 2026, approaching the benchmark of three months of import cover. In the past, highest level of SBP reserves was USD 20.15 billion, he mentioned.

Including commercial banks’ holdings, total liquid foreign exchange reserves are expected to rise to USD 25 billion by end of December 2026. In addition, forward liabilities have declined to USD 2 billion, the lowest level in the country’s history.

However, he cautioned that this outlook is susceptible to some major risks, especially those emanating from global trade fragmentation and geopolitical uncertainty.

The governor said external debt repayments of USD 25.7 billion were due in FY26, of which USD 12.5 billion have to rolled over. So far, USD 7 billion has already been rolled over, including USD 2.2 billion refinanced from China. Of the USD 11 billion payable, USD 5.7 billion has been repaid, while the remaining USD 5.3 billion will be paid by June 2026.

He said overall the country’s repayment capacity has improved significantly, adding that external debt has remained at its June 2022 level, with no net increase since then.

Responding to questions, Jameel Ahmed said SBP has become a net buyer of dollars, purchasing USD 22 billion from the market over the past three years, compared to being a net seller in earlier periods.

He said with multiple reforms and efforts, these is improvement in the foreign exchange market and currently there are no restrictions on imports, noting that the monthly import bill has increased from USD 3.5 billion to USD 5.5 billion. The governor SBP reiterated that reserve accumulation has been driven by market reforms and the exchange rate is market-determined and not controlled by the SBP.

On reserve diversification, he said Pakistan currently lacks sufficient reserves to invest in gold, adding that diversification would be considered once reserve levels improve further. He also said new currency note designs are at an advanced stage and will be issued after federal government approval.

Going forward, he mentioned that continued uptick in workers’ remittances and supportive global commodity prices is assessed to contain the current account deficit in the range of 0 to 1 percent of GDP in FY26.

He mentioned that some 8 percent increase is expected in imports and there is a possible six percent decline in exports.

Copyright Business Recorder, 2026