Solidifying economic resilience


Pakistan’s economy is on an upward trajectory, with various sectors reaping the benefits of comprehensive reforms, resulting in a reduction of the current account deficit. The International Monetary Fund (IMF) projects a decrease in external pressure, crediting Pakistan’s restructuring initiatives across economic sectors.
The State Bank of Pakistan (SBP) has played a pivotal role in this transformation. Lower repayments of foreign debt allowed the SBP to purchase dollars from the open market, diminishing the need for additional foreign loans. The central bank’s transparency is evident, with regular updates to the IMF about its foreign currency purchases from the local market.
A significant milestone is the recently concluded staff-level agreement between Pakistan and the IMF, paving the way for the board’s approval and the release of a $700 million tranche. SBP Governor Jameel Ahmad highlighted the successful resolution of backlog issues related to repatriation of profits and import payments, bolstered by improved inflows and foreign exchange reserves.
The government’s macroeconomic initiatives have also borne fruit, evident in positive indicators emerging from the market. Commercial banks, overcoming headwinds, are expected to contribute to near-term profitability, with a research house projecting a robust economic growth of 3.3% in the current fiscal year, surpassing official forecasts.
Anticipated cuts in the central bank’s benchmark policy rate are poised to benefit the government significantly, reducing interest payments on mounting debt. This fiscal relief will create room for essential development expenditures, stimulating economic activities and fostering sustainable growth.
The promising outlook extends to the control of the current account deficit, projected to hover around $4 billion. Coupled with rupee stability – marked by a notable recovery in the currency’s value in the initial months of FY24 – the economic landscape is poised for continued prosperity, without the significant depreciation witnessed in previous years.
Looking ahead, the general elections scheduled for February 2024 and the expected signing of a substantial IMF loan program are anticipated to attract foreign currency inflows from global creditors and international investors. The forecasted rate cut and complementary measures are predicted to elevate Pakistan’s economic growth to 4.3% in the next fiscal year (2024-25), further solidifying the nation’s economic resilience and progress.