Global Competitiveness Key to Breaking Pakistan’s Boom-Bust Cycle: SBP Governor

Governor of the State Bank of Pakistan (SBP), Jameel Ahmad, has emphasised the urgent need for Pakistan to move from short-term stabilization efforts to a durable, sustainable, and outward-looking growth model. Speaking at the opening session of the Pakistan Business Council’s (PBC) ‘Dialogue on the Economy,’ Ahmad highlighted that while Pakistan has repeatedly cycled through phases of growth followed by painful stabilisation, the current moment presents a genuine opportunity for long-term transformation, provided policy continuity and private-sector adaptability remain central. Ahmad outlined why the current stabilisation phase differs from previous cycles. He noted that macroeconomic discipline is now underpinned by well-coordinated and forward-looking monetary and fiscal policies, avoiding the premature easing that historically undermined stability. The central bank’s enhanced forecasting capacity, he added, allows policymakers to anchor decisions on eight-quarter projections rather than short-term indicators. “Inflation has not only fallen in line with our forecast but is expected to remain within the 5–7 percent target band over the medium term,” he affirmed. A major pillar of improved stability, Ahmad stressed, is the qualitative strengthening of external buffers. Unlike past reliance on debt-driven inflows, recent reserve accumulation reflects strategic foreign exchange purchases and reduced forward liabilities. Public-sector external debt has remained broadly stable since 2022, while the external debt-to-GDP ratio has declined from 31 percent to 26 percent. During the same period, SBP’s foreign exchange reserves have risen from a critically low USD 2.9 billion to roughly USD 14.5 billion. He shared that sustainable growth will remain elusive until policymaking is reoriented toward a long-term vision focused on socioeconomic prosperity rather than short-term, consumption-led growth spurts. This shift is reflected in long-term reforms initiated by the government and SBP under a homegrown policy framework. On the fiscal side, the Governor noted that the government’s consistent achievement of primary surpluses over the last three years has helped put public debt indicators on a sustainable path. He added that the government is implementing long-term structural reforms, including raising the tax-to-GDP ratio through documentation and widening of the tax base, as well as energy sector reforms to reduce the cost of energy. The Governor further noted that these reforms are complemented by SBP’s ongoing efforts to address gaps in financial intermediation and to increase financial inclusion across the country. Looking ahead, Ahmad underscored that Pakistan’s economic model must evolve to prevent another boom-bust cycle. He noted that historical growth averages of around 3–4 percent can no longer support a nation of over 250 million people. “Pakistan stands at an inflection point,” he said, calling on the private sector to embrace global competitiveness rather than depend on subsidies or domestic market protection. The Governor urged businesses to integrate into global value chains, modernize production, leverage emerging opportunities from partners such as the US, China, and Middle Eastern economies, and invest in innovation. “Rapid digitalization, the green transition, and global supply-chain realignments offer windows of opportunity if our firms are willing to adapt,” he added. He encouraged businesses to diversify funding sources by tapping domestic and international capital markets and adopting advanced digital tools in financial operations. He placed special emphasis on documenting supply chains, describing it as essential for improving productivity, access to finance, and supply-chain resilience. Jameel Ahmad concluded: “We cannot expect different results by doing more of the same. The stability we have achieved must now serve as the foundation for long-term prosperity. Only by moving together can we secure a future of sustained and inclusive growth.”