Pakistan Economy on the Road to Recovery, SBP Governor Shares Cautiously

the State Bank of Pakistan Governor Jameel Ahmad has provided a cautiously optimistic outlook on the country's economic recovery, highlighting progress in debt sustainability, inflation control and the balance of payments. Addressing a press briefing and an event hosted by the Federation of Pakistan Chambers of Commerce and Industry, Ahmad stated that Pakistan's foreign debt stood at 100.8 billion as of September 2024, reflecting marginal revaluation adjustments since June 2022. Despite enduring one of its worst economic crises in decades, he assured that debt levels remain sustainable, supported by multilateral financing and long term restructuring of short term obligations.

The SBP chief noted that inflation had significantly dropped from a peak of 38 percent in May 2023 to 4.1 percent in December 2024. He expressed confidence that the inflation rate would stabilize within the central bank's medium term target of 5-7 percent by the end of 2025. While acknowledging the progress made in lowering inflation, Ahmad warned that fluctuations over the next 4-5 months could create challenges for businesses and households. He emphasized that achieving sustainable economic growth hinges on controlling inflation, enhancing exports and maintaining balance of payments stability.

On the current account, Ahmad highlighted that it was in very good condition, thanks to stabilizing remittances and a controlled trade deficit. Remittance inflows are expected to surpass 35 billion in the current fiscal year, bolstered by improved confidence in economic policies. The SBP governor underscored the need for structural reforms to expand exports, which have not grown as expected, and cautioned that without increasing exports, current account and balance of payment challenges will persist.

Ahmad also addressed foreign investors dividend repatriation, stating that 1.1 billion had already been repatriated this year, compared to 2.2 billion in 2024. He noted that there were no significant issues in facilitating foreign investors in this regard. Furthermore, Ahmad urged commercial banks to take proactive measures to support small and medium enterprises, as their growth is critical for employment generation and economic revival.

The SBP chief further revealed that Pakistan's economy is positioned to resume full scale activity, provided sustainable policies are implemented. He reiterated the central bank's commitment to long term economic stability, emphasizing that maintaining fiscal discipline and achieving export led growth were essential to securing Pakistan's economic future