Pakistan’s central bank governor seeks shift from stabilization to sustainable growth

Governor of the State Bank of Pakistan (SBP), Jameel Ahmad, has emphasized the urgent need for Pakistan to transition from short-term stabilization efforts to a durable, outward-looking growth model.

Speaking at the opening session of the Pakistan Business Council’s (PBC) ‘Dialogue on the Economy,’ he noted that while Pakistan has repeatedly cycled through phases of growth followed by painful stabilization, the current moment presents a genuine opportunity for long-term transformation, provided policy continuity and private sector adaptability remain priorities.

Ahmad explained why the current stabilization phase differs from previous cycles, highlighting that macroeconomic discipline is now supported by coordinated and forward-looking fiscal and monetary policies. Enhanced forecasting capabilities have allowed policymakers to anchor decisions on eight-quarter projections rather than short-term indicators. “Inflation has not only fallen in line with our forecast but is expected to remain within the 5–7 percent target band over the medium term,” he added.

A key pillar of improved stability, the Governor stressed, is the qualitative strengthening of external buffers. Unlike past reliance on debt-driven inflows, recent reserve accumulation reflects strategic foreign exchange purchases and reduced forward liabilities.

Public sector external debt has remained broadly stable since 2022, while the external debt-to-GDP ratio has declined from 31 percent to 26 percent. During the same period, SBP’s foreign exchange reserves have surged from USD 2.9 billion to roughly USD 14.5 billion, nearly a fivefold increase.

Ahmad further noted that sustainable growth will remain unattainable without a long-term focus on socioeconomic prosperity, rather than short-lived consumption-led growth spurts of the past.

He highlighted ongoing reforms under the government’s and SBP’s homegrown policy framework, including fiscal discipline reflected in consecutive primary surpluses, measures to widen the tax base, and energy sector reforms aimed at lowering costs. Complementary SBP initiatives are addressing gaps in financial intermediation and expanding financial inclusion across the country.

Looking ahead, the Governor emphasized that Pakistan’s economic model must evolve to prevent another boom-bust cycle, as historical growth averages of 3–4 percent are insufficient for a nation of over 250 million. “Pakistan stands at an inflection point,” he said, urging the private sector to embrace global competitiveness rather than relying on subsidies or domestic market protection.

He called on businesses to integrate into global value chains, modernize production, leverage opportunities from partners such as the US, China, and Middle Eastern economies, and invest in innovation.

He also highlighted the importance of digitalization, the green transition, and global supply-chain realignments, encouraging firms to diversify funding through domestic and international capital markets while adopting advanced digital tools in financial operations. Documenting supply chains, he said, is critical for productivity, access to finance, and resilience.

Ahmad said: “We cannot expect different results by doing more of the same. The stability we have achieved must now serve as the foundation for long-term prosperity. Only by moving together - government, SBP, and the private sector - can we secure a future of sustained and inclusive growth.”