The State Bank of Pakistan (SBP) on Monday painted a brighter picture of the economy, lifting its growth outlook for the current fiscal year and projecting a sharp rise in foreign exchange reserves.
Speaking at a press conference after the Monetary Policy Committee meeting, SBP Governor Jameel Ahmed said real GDP growth for FY26 is now expected to fall between 3.75 and 4.75 percent. This is higher than the earlier estimate of 3.25 to 4.25 percent and reflects stronger momentum across key sectors.
He said the economy grew by 3.7 percent year on year in the first quarter of FY26, compared with 1.6 percent in the same period last year. The improvement was mainly driven by industry and agriculture. High-frequency indicators suggest this pace carried into the second quarter as well.
Auto sales, cement dispatches, fuel sales excluding furnace oil, fertiliser offtake, and imports of machinery and intermediate goods all showed clear growth. Large-scale manufacturing also remained strong, posting growth of 8 percent in October and 10.4 percent in November 2025. As a result, cumulative LSM growth reached 6 percent during July to November FY26.
The governor said early data and satellite imagery point to encouraging prospects for wheat, cotton, and maize crops. These gains are expected to support the services sector in the coming months.
Ahmed said the easing cycle that began in June 2024 is now showing results, noting that monetary policy steps usually take several quarters to feed into real activity. He added that growth could strengthen further in FY27 if stability continues.
On the external front, SBP’s foreign exchange reserves reached USD 16.1 billion by January 16, beating the December target. The central bank now expects reserves to cross USD 18 billion by June 2026 and rise to a record USD 20.2 billion by December 2026. Including commercial banks, total liquid reserves could reach USD 25 billion.
However, the governor cautioned that risks remain, particularly from global trade tensions and geopolitical uncertainty. He said while debt repayments are sizeable, the country’s repayment capacity has improved, with no net rise in external debt since June 2022.
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