Karachi, 13 Oct 2023: Governor of the State Bank of Pakistan (SBP), Mr. Jameel Ahmad, engaged with key international investors in a series of events, elucidating Pakistan’s economic conditions, policy responses, and future outlook amidst global and domestic challenges. This dialogue, occurring alongside the IMF-World Bank meetings and involving pivotal global banks such as Barclays, JP Morgan, Standard Bank, and Jefferies, provided a platform for transparent discussions on the nation’s macroeconomic developments and its strategy towards economic stabilization, as per the press release from the SBP.

Mr. Ahmad informed the investors that the Government and the Central Bank’s current policy framework is aimed at stabilization by navigating through macroeconomic imbalances. Highlighting the efforts of the SBP in tightening monetary policy in response to global inflationary trends, he acknowledged that unprecedented floods in the prior fiscal year presented additional complications in managing inflation. Over the last two years, the policy rate has been escalated by 1500 basis points by the SBP, paralleled by enhanced fiscal consolidation efforts by the government.

According to Mr. Ahmad, these stabilization measures have begun to demonstrate positive results, evidenced by a decline in inflation to 31.4 percent in September 2023, down from a peak of 38.0 percent in May 2023, and an anticipated further descent in the forthcoming months. The external account has also witnessed substantial improvement, and foreign exchange buffers are in the process of being strengthened. With a policy rate set at 22 percent, the SBP forecasts the real interest rates to turn notably positive looking forward, particularly as inflation is projected to further reduce during the second half of this fiscal year. The Stand-By arrangement with the IMF is foreseen to back the continuing policy initiatives to stabilize the economy.

Additionally, Mr. Ahmad emphasized the role of the market-determined exchange rate and support from multilateral and bilateral lenders in managing external sector challenges. A reduction in the current account deficit (CAD) to 0.7 percent of GDP in FY23 from 4.7 percent in FY22 was observed. While administrative measures, contributing to the CAD decrease last year, have been withdrawn, the ongoing stabilization initiatives and flexible exchange rate are anticipated to maintain the CAD within 0.5-1.5 percent of GDP in FY24.

The foreign exchange buffers are experiencing a positive trend, with a build-up in reserves and a decline in forward foreign exchange liabilities, as explained by Mr. Ahmad. From January 2023, the SBP’s foreign exchange reserves have improved, rising from $3.1 billion to $7.6 billion as of end-September 2023, largely supported by non-debt creating inflows amid favourable market conditions. The forward book target of $4.2 billion for end-September 2023, agreed upon with the IMF, has been surpassed significantly. SBP is also well-positioned to meet other end-September IMF targets, including Net International Reserves (NIR) and Net Domestic Assets (NDA).

In conclusion, Governor Ahmad stressed the multifaceted challenges confronting emerging economies, such as access to capital markets, increasing anti-trade sentiments, debt sustainability, and fostering climate-resilient and inclusive economies. He underscored the necessity for leading entities like the IMF and World Bank to spearhead efforts in addressing these challenges, and affirmed Pakistan’s commitment to rectifying structural weaknesses and achieving sustainable, inclusive economic growth over the medium term with the assistance of its multilateral and bilateral partners.