SBP chief warns global uncertainty could hit Pakistan growth in FY26 final quarter

Pakistan's central bank governor Jameel Ahmad warned Friday that global uncertainty and rising oil prices could weigh on economic growth in the final quarter of fiscal year 2025-26.

Speaking at the Karachi Chamber of Commerce and Industry, Ahmad said Pakistan's external account had stabilized despite ongoing Middle East tensions, though risks to the Q4 outlook remained significant.

How will global uncertainty affect Pakistan's GDP growth in FY26?

The State Bank of Pakistan projects annual GDP growth between 3.75% and 4.75% for FY26, but global uncertainty may push the outcome toward the lower end of that range.

The Pakistan Bureau of Statistics estimates growth at 3.7% through the first nine months of the fiscal year.

Rising oil prices and trade disruptions tied to Middle East tensions are the primary risks to Q4 performance.

What is the current state of Pakistan's external account?

Ahmad said Pakistan's external position had improved dramatically compared with 2023, when businesses struggled to open Letters of Credit and foreign exchange reserves stood at just $3 billion. Reserves have since risen to $17 billion. Average monthly imports have crossed $5 billion, up from roughly $3 billion three years ago, and the LC situation has improved substantially.

Pakistan's current account remained in surplus through the first nine months of FY26. The governor projected the full-year current account deficit would stay between zero and 1%.

He attributed the improvement partly to State Bank reforms and enforcement action against hundi and hawala networks.

Will remittances hit a record high in FY26?

Remittances reached $38 billion in the previous fiscal year and are expected to surpass $41 billion in FY26, which would mark a new record. Ahmad said these inflows had been a key pillar of external stability. The stronger reserve position and remittance growth have placed Pakistan's external account in what he called a "much stronger and healthier position."

Why could inflation rise above 7% in the final quarter?

Ahmad cautioned that Pakistan faces temporary inflationary pressure in Q4, with inflation potentially exceeding 7%.

Rising global oil prices, linked to Middle East conflict, are the main driver. The central bank said it remains committed to bringing inflation back within its medium-term target range of 5% to 7%.

How is the SBP supporting SME growth?

The State Bank has intensified its focus on small and medium-sized enterprises by simplifying regulations, cutting procedural requirements and directing banks to build dedicated SME growth plans.

SME financing grew from PKR 491 billion in June 2024 to PKR 882 billion by December 2025. The SBP has set a target of PKR 1.5 trillion by June 2028 and introduced a one-page loan application form to reduce barriers for small businesses.

Ahmad said Pakistan's future GDP growth is directly linked to SME expansion, framing the sector as central to the country's long-term economic strategy.

What is happening to Pakistan's export performance?

Weak global economic conditions and lower international commodity prices have constrained export growth. Rice exports worth $3.5 billion supported earnings last year, but falling global rice prices cut export revenue by nearly $1 billion this year.

Total exports are estimated at around $30 billion for FY26, down from $32 billion the previous year, though the government expects improvement measures to show results within two months.

What else did the SBP governor address?

Ahmad confirmed that designs for Pakistan's new currency notes have been finalized and submitted to the federal cabinet for approval. He said exchange company rates are determined by market forces, with the State Bank playing no direct role in setting them.

The governor also confirmed progress on a licensing and regulatory framework for virtual assets in Pakistan.