Despite shocks, economic data improves

SBP governor warns against short-term fixes at expense of long-term stability

KARACHI:

State Bank of Pakistan (SBP) Governor Jameel Ahmad has said that Pakistan's macroeconomic recovery has been remarkable since 2022 and economic fundamentals have significantly improved despite severe global and regional shocks.

Addressing the next generation of accounting and finance professionals at the annual convocation ceremony of the Institute of Cost and Management Accountants of Pakistan (ICMA Pakistan), the governor noted that though challenges still abound, "we have come a long way since 2022".

"Despite the significant supply shocks, we have managed to contain the impact on the domestic economy. Inflation remained close to our target range in FY26. While it has gone up since then, it is projected to gradually ease towards the target range, supported by prudent monetary tightening," he said.

Additionally, the external account remains stable, with the current account deficit expected to stay within the range of 0-1% of GDP. Real GDP growth is also recovering gradually, from a contraction in FY23 to 3.7% in FY26, and "we expect it to rise further in the ongoing fiscal year".

These improvements in economic fundamentals and the growing resilience in the economy were being recognised by international credit rating agencies, multilateral partners and foreign investors.

Reflecting on the adjustments made during FY22 and FY23, the governor emphasised that timely, decisive action, fiscal discipline and forward-looking, evidence-based policymaking helped strengthen Pakistan's economic resilience. He noted that raising the policy rate and maintaining it for almost a year, alongside temporary measures to manage non-debt foreign exchange outflows, had been necessary to restore macroeconomic stability and avert a deeper external financing and debt crisis.

He stressed that lasting economic progress could not be achieved through short-term fixes at the expense of long-term stability. The governor added that maintaining a positive forward-looking real policy rate had helped bring inflation down from over 30% to within the medium-term target range.

Meanwhile, risk-based supervision strengthened the identification of financial stability risks, with financial sector adequacy and performance indicators improving despite the elevated policy rates. Addressing the graduates directly, the governor said, "when faced with such a decision, let evidence guide your judgement, let professional ethics define your conduct, and let long-term commitment to Pakistan's sustainable and inclusive development inform your action."

While encouraging the graduating students, he said, "I am confident that you will utilise the skills and knowledge that you have gained during your rigorous studies, and that your dedication, hard work, and commitment to excellence will help shape the future economic landscape of Pakistan."

Concluding his speech, the governor underscored the accounting and finance profession's vital role in strengthening institutions, promoting accountability and ensuring informed decision-making.