Central Bank Governor Jameel Ahmad warned that inflation is set to peak by mid-year, emphasizing a policy approach focused on medium-term economic stability
By S.M. Inam
KARACHI: State Bank of Pakistan Governor Jameel Ahmad expects the economy to grow by as much as 4.75% this fiscal year, pushing back against a recent downgrade by the International Monetary Fund.
In written responses to Reuters, Ahmad argued that the recovery is broader and more durable than headline export data suggest. The central bank raised its FY26 growth forecast to 3.75–4.75% at its January meeting, 0.5 percentage points higher than the previous range, despite a contraction in exports in the first half of the year and a widening trade deficit.
The governor said differences in projections were not unusual and reflected timing issues, including the IMF’s incorporation of flood-related assessments in its latest outlook. “All these sources and indicators, along with FY26-Q1 data, point to a broad-based recovery in all three sectors of the economy,” he said. He added that agricultural activity had remained resilient despite floods and was even performing better than its targets.
Ahmad also said financial conditions had eased significantly following a cumulative 1,150‑basis‑point cut in the policy rate since June 2024, with the full impact still feeding through. This, he said, was supporting growth while preserving price and economic stability. Last month, the central bank held its benchmark rate at 10.5%, defying expectations for a cut.
The divergence with the IMF comes at a delicate moment for Pakistan, which is emerging from a balance-of-payments crisis under a $7 billion IMF program. Past growth spurts have often led to currency pressure and declining foreign exchange reserves, making the sustainability of the current rebound a key question for investors.
Ahmad said high-frequency indicators and 6% growth in large-scale manufacturing between July and November pointed to strengthening demand, while agriculture remained resilient despite last year’s floods. While exports declined in the first half of the fiscal year, he said the fall reflected low global prices and border disruptions rather than weaker activity.
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