SBP optimistic about growth prospects

KARACHI: Governor State Bank of Pakistan (SBP) Jameel Ahmad on Thursday expressed confidence that Pakistan’s economic recovery will further strengthen in the current fiscal year (FY27), projecting higher economic growth, lower inflation and stronger external accounts.

“Our (SBP) focus is on strengthening the economic fundamentals rather than achieving cosmetic improvements and long-term economic resilience can only come through strong macroeconomic fundamentals,” he said.

Addressing at a press conference at the SBP head office in Karachi on Friday, Governor Jameel Ahmad said that Pakistan achieved significant macroeconomic gains during the last fiscal year.

According to provisional estimates, Pakistan’s economy has grown by around 3.7 percent in FY26, slightly below the SBP’s projected growth range of 3.75 to 4.75 percent, although he expressed confidence that the final GDP figure would be revised upward.

He said the SBP had initially expected economic growth to exceed 4 percent in FY26, but the target could not be achieved due to the impact of the Middle East conflict and weaker-than-expected agricultural output, which weighed on overall economic performance.

“The economic recovery has gained momentum and we expect economic growth in the current fiscal year to be better than last year,” the governor SBP said.

Also read: Real GDP grew by 3.8% in H1FY26, deep economic reforms key to sustainable growth: SBP

He said that Pakistan had moved a long way from the economic crisis witnessed in FY23, when severe import restrictions were imposed to manage external account pressures. The situation improved significantly in FY24 and has become much stronger by the end of last fiscal year (FY26), reflecting the country’s improving macroeconomic fundamentals.

He noted that the LSM sector showed encouraging signs of recovery, recording around 6 percent annual growth, while some months posted double-digit growth of nearly 10 percent, indicating a revival in industrial activity.

The SBP governor said that inflation is remained under control despite global oil price volatility. Inflation stood at 11.1 percent in June, while the average inflation for FY26 remained around 7.05 percent, close to the SBP’s target range of 5-7 percent.

He expressed optimism that inflation would decline further during the coming months, with official projections to be announced in the next monetary policy.

Highlighting improvements in the external sector, Jameel Ahmed recalled that Pakistan’s current account deficit had widened to USD 17 billion in FY22, prompting import restrictions in FY23. However, the country recorded a current account surplus in FY25, while the first eleven months of FY26 also posted a surplus of USD 255 million, broadly in line with the SBP’s projection of 0-1 percent of GDP.

He said Pakistan’s external position has strengthened considerably, with the SBP’s foreign exchange reserves rising by USD 5.5 billion to USD 18.4 billion by the end of FY26 despite making USD 9 billion external debt repayments during the last quarter of FY26. The governor was confident that SBP’s reserves to reach USD 20 billion by December 2026.

The governor SBP also pointed to significant improvements in the country’s debt profile, saying Pakistan’s external debt remained broadly stable at around USD 100 billion over the past four years, while the composition of debt had improved through a shift from short-term to longer-term financing.

“This has improved the quality of our debt and strengthened investor confidence,” he said, adding that international credit rating agencies have acknowledged the country’s stronger external position by upgrading Pakistan’s outlook and further improvements are expecting in the coming months.

On workers’ remittances, the Jameel Ahmed said inflows have risen consistently from USD 27.3 billion in FY23 to USD 38 billion in FY25, and are projected to reach USD 41.5 billion by the end of FY26. He expressed confidence that remittances would continue to grow in FY27, with the SBP projecting inflows of around USD 44 billion.

Dismissing concerns that the withdrawal of government-funded remittance incentives would discourage overseas Pakistanis from using formal channels, Jameel Ahmad said the move would have no financial impact on either senders or recipients, as commercial banks would absorb the cost under the revised mechanism.

“Home remittances will continue to increase despite the withdrawal of some incentives previously provided to banks,” he said, adding that the central bank expects remittance inflows to reach USD 44 billion in FY27.

He explained that the government had decided last November to gradually phase out the remittance incentive programme rather than ending it abruptly. The governor SBP also confirmed that the currently Sohni Dharti Remittance Programme has been discontinued and will be replaced with a new, more attractive scheme developed in collaboration with commercial banks during the first quarter of FY27.

“The previous programme was not sufficiently attractive. The new scheme will offer better features for overseas Pakistanis,” he said.

He said monthly inflows under the Roshan Digital Account (RDA) programme currently average around USD 300 million monthly, while enhanced features are being introduced to further strengthen the initiative.

Replying a question, he revealed that Pakistan is finalizing arrangements with financial institutions and exchange companies in the Middle East to facilitate faster remittance transfers. Delayed due to technical issues, the agreements are expected to be completed by December 2026, he mentioned.

On exports, he said that exports not performed well in the last fiscal year as lower international rice prices affected export earnings. However, he hoped that exports would grow in this fiscal year as the government has introduced a number of incentives in the federal budget to support export-led growth.

“Pakistan’s overall external sector would remain stable, supported by higher remittances and goods exports, stronger reserves and sustained economic recovery,” he said.

As the economy grows, imports to rise, therefore, sustained growth in exports is critical to maintaining external sector stability, he said.

In addition, Pakistan’s sovereign bonds have also performed better in international markets as sharp improvement in Pakistan’s external account has strengthened investor confidence and improved the country’s standing in international financial markets.

Jameel Ahmad said the SBP would continue building foreign exchange reserves until they reach internationally accepted benchmarks equivalent to at least three months of import cover. The governor said the SBP has almost reduced its forward foreign exchange liabilities, from nearly USD 6 billion three years ago to about USD 950 million by end of FY26.

He said that improved performance in IT exports and other services sectors has also strengthened the country’s services account, further supporting the overall external position.

According to the governor SBP, the rise in remittances is mainly the result of structural reforms, including stricter action against smuggling and illegal cross-border cash flows, stronger enforcement against the hundi and hawala system, and reforms in the exchange company sector. The number of exchange companies was reduced from 166 to 18 through consolidation, while some 13 new exchange companies backed by commercial banks were established to improve transparency and governance in the foreign exchange market.

These measures, along with the narrowing of the gap between open market and interbank exchange rates, encouraged overseas Pakistanis to send money through formal banking channels instead of informal networks.

Responding to concerns that Pakistan’s reserves have increased only because of external borrowing, Jameel Ahmed said that the facts do not support the perception that the current reserve position is simply the result of new borrowing.

“The country’s total external debt has remained broadly unchanged at around USD 100 billion, while bilateral deposits and Chinese loans were already part of reserves during previous years when foreign exchange reserves had fallen below USD 3 billion,” he added.

Copyright Business Recorder, 2026