SBP Governor's press conference

Expresses confidence in the government’s reforms

STate Bank of Pakistan Governor Jamil Ahmad gave the government’s policies a certificate of good housekeeping, saying not that the economy was recovering, but also that the recovery would continue in the fiscal year just begun. He noted that GDP growth for the previous fiscal year, FY26, was estimated at four percent, which was in accordance with the 3.74 to 4.75 percent estimated by the SBP, and would have been higher, had agricultural output been as estimated, and if there had been no crisis in the Middle East,Another important indicator he highlighted was large scale manufacturing, which seemed to be recovering, with growth of six percent over all, with some months recording a double-digit increase. He also referred to the increase in forex reserves, which had stood at $18.4 billion at the end of June, up $5.5 billion over the course of the fiscal year, and expected to rise to $20 billion by December. He noted that this increase was achieved despite the country having made payments of $9 billion in the course of the year to service its debt. The debt itself, had remained at around$100 billion for four years, but the debt profile had been changed by the conversion of short-term debt to longer term.

The IMF had contemplated an adversarial relationship between the SBP and the government, and it is to that end it insisted on changes to the SBP Act giving its governor autonomy, making these amendments conditions or continued loan support. This is reflected in the government\ desire for pump priming, in the shape of cuts in the interest rate, as opposed to the SBP’s Monetary Price Committee’s desire to rein in inflation. This is a global phenomenon, and has reached the USA, with US President Donald Trump attempting to remove a member of the Federal Reserve, which sets the interest rates, and has resisted Mr Trump’s efforts to have it boost the economy.

The SBP faces a similar situation, though no MPC member faces a midnight knock. The business community, of which the PM is a member, wants lower interest rates, while the SBP wants them up to resist inflationary pressures. However, the MPC has trod a fairly conservative line, and has so far resisted increasing interest rates. However, the government toeing the IMF line as carefully as it has won it praise for the SBP, as it provides the policy framework within which it operates.