Delivering a keynote address at the Ninth Annual Microfinance Conference in Karachi, the State Bank of Pakistan (SBP) Governor Jameel Ahmad highlighted signs of "durable macroeconomic stability," citing a sharp decline in inflation, improved foreign exchange reserves, and recovering growth.
However, the reality on ground, reported by international institutions and economists, tells a starkly different story.
According to an official statement issued on Thursday, Ahmad noted that the difficult, yet necessary policy and regulatory measures taken in recent years have led to a period of macroeconomic stability. While highlighting improvements in Pakistan's macroeconomic indicators, he said inflation has declined sharply and is projected to remain within the government's target range of 5-7% over the medium term, notwithstanding temporary upward pressure on prices due to recent floods, reads the statement.
Speaking to The Express Tribune, Economist Muzzammil Aslam, likened Pakistan's current economic condition to that of a hospital patient whose stomach pain is treated but whose overall health remains critical. "If a patient comes with stomach pain and the hospital finds kidney stones, then after partial treatment says the pain is gone – can we say his overall health is fine? No, it's still very bad, even worse than before," he said, drawing parallels to Pakistan's economic situation.
Aslam noted that unemployment is rising while over 45% of the population has fallen below the poverty line. He added that taxes are at an all-time high, while electricity tariffs are among the highest in the world, making it increasingly difficult to conduct business in Pakistan.
The event was hosted by the Pakistan Microfinance Network, and the conference focused on the theme "Renaissance of Microfinance," underlining the renewed commitment to leveraging microfinance for inclusive economic development.
Regarding the external sector, the SBP governor pointed out that the country's foreign exchange reserves are now almost five times higher than the level recorded in February 2023, reflecting strategic interbank foreign exchange purchases to shore up buffers. He added that "had we not built up our reserves from interbank purchases, the government would have needed to borrow significantly higher amounts – at higher interest rates – to make timely debt repayments."
Ahmad stated that SBP's monetary policy and regulatory efforts have been complemented by sustained fiscal consolidation by the government, which has helped contain demand-side pressures on inflation and the external account. As a result, the country's debt dynamics have improved considerably over the past three years. He said economic growth is on the path to recovery and expected to accelerate further in the current fiscal year, notwithstanding temporary expected losses from recent floods, mainly in the agriculture sector.
An official of the Exchange Companies Association of Pakistan (ECAP), speaking to The Express Tribune on condition of anonymity, warned that the SBP's continued purchase of US dollars from the open market could have long-term repercussions for the economy.
He explained that Pakistan is heavily import-dependent, with nearly 3540% of raw materials sourced from abroad for both export-oriented and domestic industries. "If the exchange rate is artificially maintained, it creates a ripple effect on exports and locally produced goods," he said.
The official added that higher oil import costs and even minor fluctuations in the rupee's value can raise the national debt burden by Rs7-8 trillion, stressing that the exchange rate should be determined by market forces rather than administrative intervention.
He further claimed that the government is buying dollars from the open market to appease exporters, while exchange companies are selling over 95% of their dollar holdings to the SBP. "If the SBP stops buying, the dollar rate will automatically fall, as prices are driven by supply and demand," he noted.
Commenting on exports, the official observed that even when the rupee traded at around Rs250 per dollar, export volumes remained largely unchanged. "Despite a 35% rebate, exports did not rise significantly. With just a 2% incentive, remittances might have doubled," he added.
Aslam also pointed out that exports are falling, foreign investment remains negligible, and despite government celebrations over the Pakistan Stock Exchange's performance, foreign investors have offloaded $250 million worth of shares since January.
Citing World Bank estimates, Aslam said the 2022 floods caused losses amounting to $65 billion, while the Federal Board of Revenue (FBR) recorded a tax shortfall of Rs200 billion over the past three months, reflecting a decline in citizens' incomes.
He criticised the central bank governor's optimistic portrayal of the economy, asserting that ground realities tell a different story and emphasised the urgent need for deep structural reforms to revive sustainable growth.
The World Bank recently projected Pakistan's real GDP growth to remain around 2.6% for FY2025-26, far lower than government expectations, as the country continues to grapple with deep-rooted structural and external challenges.
