The Governor of the State Bank of Pakistan (SBP), Jameel Ahmed, presented an encouraging outlook for the economy, revising the GDP growth estimate for fiscal year 2026 to a range of 3.75 to 4.75 percent. He also stated that SBP’s foreign exchange reserves are expected to rise to a record level of $20.2 billion by December 2026.
According to sources, speaking at a press conference following the Monetary Policy Committee meeting, the SBP Governor said that in the first quarter of FY2026, real GDP growth was 3.7 percent year-on-year, compared to 1.6 percent during the same period of the previous fiscal year. He noted that this improvement was driven by strong performance in the industrial and agricultural sectors, while high-frequency indicators suggest that economic activity maintained similar momentum in the second quarter.
Significant increases were recorded in auto sales, local cement deliveries, furnace oil and petroleum product sales, fertilizer consumption, and imports of machinery and other goods, indicating strong domestic demand. Large-scale manufacturing grew by 8 percent and 10.4 percent year-on-year in October and November 2025, respectively, while the cumulative growth from July to November was 6 percent.
Regarding agriculture, he said recent planting data and satellite imagery suggest better yields for wheat, cotton, and maize, which would also support the services sector. Given these conditions, the growth outlook has improved compared to earlier projections, and if the target is met, it would mark the highest average growth in the past 30 years.
Jameel Ahmed added that the effects of monetary easing initiated in June 2024 are now becoming visible, as policy measures typically take 6 to 8 quarters to transmit into the economy. He noted that growth is likely to strengthen further in FY2027.
He reported that as of January 16, SBP’s foreign exchange reserves had reached $16.1 billion, driven by the central bank’s purchases in the interbank market. Inflows from remittances and IT services exports have helped limit the current account deficit and increase reserves. Reserves are expected to surpass $18 billion by June 2026 and reach $20.2 billion by December 2026, covering roughly three months of import requirements. Total reserves, including commercial banks, could reach $25 billion, while forward liabilities have fallen to a historic low of $2 billion.
The SBP Governor cautioned that risks such as global trade disruptions and geopolitical tensions could affect this outlook. External debt repayments of $25.7 billion are due in FY2026, of which $12.5 billion will be rolled over. So far, $7 billion has been rolled over, and $5.7 billion has been paid.
He stated that Pakistan’s debt repayment capacity has improved significantly, there are no restrictions on imports, and the exchange rate is market-determined. Imports are expected to increase by 8 percent next fiscal year, while exports may decline by roughly 6 percent, with the current account deficit projected to remain between 0 and 1 percent of GDP.
