State Bank of Pakistan (SBP) Governor Jameel Ahmad forecasts that the economy could grow up to 4.75% this fiscal year. He challenged the IMF’s recent downgrade. Ahmad stressed that the recovery is broader and stronger than headline export numbers suggest.
The SBP raised its FY26 growth forecast to 3.75–4.75% at its January meeting. This is 0.5 percentage points higher than the previous estimate. The increase comes despite falling exports in the first half of the year and a widening trade deficit. Ahmad said differences in forecasts are common. They often reflect timing issues. He added that the IMF’s assessment included flood-related impacts.
“All these indicators, along with FY26-Q1 data, point to a broad-based recovery across all three sectors,” Ahmad said. He noted that agriculture has stayed resilient despite floods. In fact, it is performing above targets.
Monetary Policy and Financial Conditions Support Growth
Ahmad highlighted easing financial conditions. Since June 2024, the SBP has cut the policy rate by 1,150 basis points. The full effect is still flowing through the economy. This supports growth while maintaining price stability. Last month, the central bank kept its benchmark rate at 10.5%, against expectations of another cut.
The difference with the IMF comes as Pakistan recovers from a $7 billion balance-of-payments crisis. Past growth surges often caused currency pressure and reduced foreign reserves. Sustainability remains a key concern for investors.
Exports Decline Offset by Remittances and Manufacturing
Exports fell in the first half of FY26. Ahmad said this was due to low global prices and border disruptions, not weaker activity. High-frequency indicators show growing demand. Large-scale manufacturing rose 6% between July and November. Agriculture also remains strong despite last year’s floods.
Ahmad expects the current account deficit to stay within 0–1% of GDP. Strong remittances are offsetting the wider trade gap. They also boost reserves above programme targets. Eid-related inflows could further improve the situation.
The government plans to issue panda bonds—yuan-denominated debt in China’s domestic market. Ahmad said this could help diversify external financing and attract new investors. Meanwhile, the SBP continues buying dollars in the interbank market to strengthen reserves.
“Economic stability has improved,” Ahmad said. “But structural reforms are essential to sustain growth and boost productivity.”
