Macroeconomic outlook improves markedly: SBP

In Business
April 19, 2024


Pakistan’s macroeconomic outlook has improved substantially as a result of a prudent monetary policy, backed adequately by fiscal consolidation and beginning of implementation of key structural reforms, said State Bank of Pakistan (SBP) Governor Jameel Ahmad.

The central bank governor met key international investors during multiple events organised by leading global banks and financial firms, including JP Morgan, Citibank and Jefferies, on the sidelines of IMF-World Bank Spring Meetings in Washington DC, said a statement released by the SBP on Thursday.

He highlighted that over the past year, inflation had declined sharply in Pakistan, reaching a two-year low of 20.7% in March 2024 from a peak of 38% in May 2023.

He explained that the deceleration in inflation was broad-based, reflecting the combined impact of monetary tightening, fiscal consolidation, easing import supplies, improved agricultural output and the base effect.

More importantly, core inflation declined markedly, reaching 15.7% in March, after staying above 20% throughout last year.

Ahmad told the investors that Pakistan’s external sector had also stabilised, as reflected in the sharp reduction in the current account deficit to $1 billion during July-February FY24 compared to $3.8 billion in the same period of last year.

In addition to the stabilisation policies, the improved agricultural output has contributed to higher food exports, while lowering the import demand for agricultural commodities like wheat and cotton.

Remittances from overseas Pakistanis have risen consistently since October 2023 on a year-on-year basis, driven by incentives and regulatory measures to divert inflows towards formal channels.

These improvements in the external account have allowed the SBP to more than double its foreign currency reserves from $3.1 billion in January 2023 to around $8 billion by mid-April 2024 despite the repayment of a $1 billion Eurobond this month.

At the same time, the SBP’s forward liabilities have gone down significantly from $5.7 billion in January 2023 to $3.4 billion in February 2024.

The SBP governor pointed to the improvement in Pakistan’s external debt dynamics, with a reduction in its gross financing requirement due to a sizable contraction in the current account deficit.

Moreover, the maturity profile of external debt has improved, with the share of relatively costly short-term commercial loans declining while the share of long-term concessionary financing from multilateral agencies, coupled with support from bilateral partners, is rising.

Published in The Express Tribune, April 19th, 2024.

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