Fundamentals improve despite shocks: SBP chief

Karachi witnessed a speech by State Bank of Pakistan Governor Jameel Ahmad on Wednesday, where he highlighted the significant improvement in the country's economic fundamentals, despite facing severe global and regional shocks. Speaking at the annual convocation of the Institute of Cost and Management Accountants of Pakistan, Ahmad noted that while challenges persist, "we have come a long way since 2022."

Ahmad remarked that even with significant supply shocks, the impact on the domestic economy was contained. He further stated that inflation is currently close to the target range in the fiscal year 2026 (FY26). However, it has since risen but is projected to gradually ease towards the mid-year FY27 target range of 5-7 percent, thanks to prudent monetary tightening.

The external account remains stable, with the current account deficit projected to stay within 0 to 1 percent of GDP. Real GDP growth, which contracted in FY23, is now recovering, growing to 3.7 percent in FY26. Ahmad expects this growth to further increase in FY27.

The governor also emphasized that these improvements in economic fundamentals and the growing resilience of the economy are being recognized by international credit rating agencies, multilateral partners, and foreign investors. To restore macroeconomic stability and prevent a deeper external financing and debt crisis, Ahmad argued that raising the policy rate, after keeping it steady for almost a year, combined with temporary measures to manage non-debt foreign exchange outflows, was necessary.