KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmad admitted that the country’s exports were lower than expected and urged the business community to step up production and international trade activity.
He claimed that the country’s external liabilities have remained unchanged for an extended period, attributing this stability to the incumbent government’s prudent economic and fiscal management.
“Foreign debt has not increased in the last two and a half years, while an $8 billion loan has been fully repaid in the short term,” SBP governor stated addressing industry leaders at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in Karachi on Thursday.
He highlighted that the country’s actual foreign debt stood at more than $100.08 billion, adding that its volume has improved significantly, adding that the foreign debt increased by $500 million due to the revaluation of debt.
The central bank chief said that debt service and balance of payments improved as the country borrowed money mostly through multilateral institutions this year and that the short-term debt was being paid by long-term debt.
The governor stated that controlling external accounts would pave the way for economic growth. “Issues such as high interest rates stand addressed, and there are no longer any restrictions on imports,” Ahmad added.
Last month, the central bank slashed the key policy rate by 200 basis points (bps) to 13%, marking its fifth consecutive cut following a continuous reduction in the inflation rate which fell to 4.1% in December 2024.
The central bank chief also highlighted that the current account situation has stabilised, with remittances projected to reach nearly $3 billion in December. “The remittances for the current fiscal year are likely to total at least $35 billion,” he forecast.
The governor further noted that food inflation had peaked at 47% in May 2023, adding that the inflation rate might rise during the April to June 2025 period.
On external investment, the governor revealed that $2.2 billion was allowed to be taken out of the country in 2024.
Additionally, he announced that small and medium-sized enterprises (SMEs) would benefit from a new funding facility, allowing businesses to borrow up to Rs10 million without collateral.
Saying that the government would cover 20% of any losses on these loans, Ahmad also confirmed that export-based small businesses would be prioritised for these credits.
During the event, the FPCCI president briefed the central bank governor on the ongoing issues with trade with Iran and Afghanistan, urging immediate interest rate cuts to 9% to support the economy.
Pakistan is navigating a challenging economic recovery path and has been buttressed by a $7 billion facility from the International Monetary Fund (IMF) in September 2024.
Though the country’s economy has stabilised since it came close to defaulting last summer, it is dependent on IMF bailouts and loans from friendly countries to service its huge debt, which swallows up half of its annual revenues.
Islamabad wrangled for months with IMF officials to unlock the latest loan, which came on the condition of reforms including hiking household bills to remedy a permanently crisis-stricken energy sector and raising pitiful tax takings.
