Pakistan’s central bank has raised its growth forecast for this fiscal year, signalling confidence in the economy despite a recent downgrade by the International Monetary Fund.
State Bank of Pakistan (SBP) Governor Jameel Ahmad said the economy could expand by 3.75 to 4.75 percent in FY26, half a percentage point higher than previous projections. He told Reuters that the recovery is broader and more durable than headline export figures suggest.
“All sources and indicators, along with first-quarter data, point to a broad-based recovery across agriculture, industry, and services,” Ahmad said. He added that the agricultural sector remained resilient despite last year’s floods and had even outperformed its targets.
Financial conditions have also eased following a cumulative 1,150 basis point cut in the policy rate since June 2024. Ahmad said the full impact of these cuts is still feeding through, supporting growth while maintaining price and economic stability. The central bank last month held its benchmark rate at 10.5 percent, defying expectations for another cut.
The disagreement with the IMF comes as Pakistan is emerging from a balance-of-payments crisis under a $7 billion IMF programme. Ahmad said high-frequency economic indicators and a 6 percent rise in large-scale manufacturing from July to November point to strengthening demand.
Exports fell in the first half of the fiscal year, but Ahmad said the decline reflected low global prices and border disruptions rather than weaker domestic activity. He forecast that the current account deficit would remain within 0–1 percent of GDP, supported by strong remittances and inflows related to the Eid festival.
Ahmad also highlighted the potential upside from Pakistan’s planned issuance of panda bonds, a yuan-denominated debt sold in China’s domestic market, to diversify external financing and expand the investor base.
The central bank has been consistently purchasing dollars in the interbank market to strengthen foreign exchange reserves. Ahmad said that while economic stability has improved, structural reforms remain essential for sustaining stronger growth and improving productivity.
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