SBP chief cites improved buffers to withstand US-Iran conflict shocks

KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmad has asserted that Pakistan's economy is now resilient enough to withstand the external shocks posed by the escalating Middle East conflict, citing a faster-than-expected improvement in key macroeconomic indicators.

During high-level meetings on the sidelines of the IMF-World Bank spring meetings, the Governor briefed senior executives from global financial institutions—including JP Morgan, Barclays, and Citibank—as well as major credit rating agencies. He maintained that while the regional instability has introduced fresh uncertainties, the country's current economic position is significantly stronger than during previous global crises, such as the 2022 Russia-Ukraine war.

Governor Ahmad presented data showing that inflation averaged 5.7 per cent during the first nine months of the fiscal year, remaining within the target range. He highlighted that the external current account is currently in surplus, with the SBP's foreign exchange reserves having strengthened to $16.4 billion. These reserves are projected to climb to $18 billion by June 2026, bolstered by central bank market purchases and anticipated official inflows.

The SBP chief also noted a sustainable recovery in domestic growth, with real GDP expanding by 3.8 per cent in the first half of FY26, more than doubling the 1.8 per cent growth recorded in the same period last year. He credited this progress to a "prudent" mix of monetary and fiscal policies, including the government's achievement of primary fiscal surpluses.

Ahmad underscored that these improved fundamentals provide a necessary buffer against the sharp rise in global energy prices and freight costs triggered by the Middle East hostilities. He reaffirmed the central bank’s commitment to a "cautiously prudent" monetary policy to safeguard price stability.

Additionally, the Governor pointed to the staff-level agreement with the IMF as an independent validation of Pakistan’s reform agenda. He also highlighted the success of the Roshan Digital Account (RDA), which has seen inflows exceed $12.4 billion, and announced regulatory updates aimed at attracting further foreign investment from non-resident entities.