Pakistan's central bank sees FY26 growth up to 4.25 percent, trade gap to widen
The forecast comes as Pakistan implements reforms under a $7 billion International Monetary Fund (IMF) program approved in September 2024, which has helped stabilize the currency, ease inflation and restore investor confidence. The IMF deal is tied to fiscal consolidation, energy sector reforms, and measures to boost exports, part of a broader effort to strengthen macroeconomic stability after years of chronic external imbalances.
The economy returned to moderate growth last year, aided by improved agricultural output, lower global commodity prices, and a series of policy rate cuts totaling 1,100 basis points since late 2024. Inflation has eased from record highs, while the rupee has stabilized against the dollar after a crackdown on the illegal currency market.
'With the policy rate kept unchanged at 11 percent in the MPC meetings in June and July, the MPC expects the real policy rate to be adequately positive to stabilize inflation within the medium-term target range,' the State Bank of Pakistan (SBP) said in its Monetary Policy Report (MPR) released on Wednesday.
'In the external account, the MPR expects the trade deficit to widen further and, notwithstanding continued expected growth in workers' remittances, result in a current account deficit of 0–1 percent of GDP in FY26,' it added.
The central bank said 'projected financial inflows, coupled with continued SBP interbank FX purchases, would support further buildup in SBP's FX reserves, which are projected to rise to $15.5 billion by end-December 2025.'
Economic activity, it said, was 'projected to gain further traction, with the impact of the earlier reductions in the policy rate still unfolding,' and real GDP growth was expected to range between 3.25 percent and 4.25 percent in FY26.
The MPR also flagged 'potential external and domestic risks to the baseline macroeconomic outlook' and included analysis of the lag in monetary policy transmission, comparisons with global central bank decisions, and the SBP's use of alternative data and machine learning to fill gaps in labor market and agriculture statistics.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Arab News
6 hours ago
- Arab News
Pakistan launches third Chinese-built Hangor-class submarine amid deepening defense ties
KARACHI: Pakistan on Friday launched its third Hangor-class submarine in China, the navy said in a statement, in the latest sign of the country's growing military ties with Beijing. The launch comes months after Pakistan's brief but intense military standoff with India, which saw the two nuclear-armed neighbors exchange air, missile, drone and artillery attacks. In recent years, Islamabad has strengthened its defence collaboration with China, inducting state-of-the-art Chinese hardware across all three services, including Z-10ME attack helicopters earlier this month and JF-17 fighter jets jointly developed with Beijing. The navy said the new vessel, equipped with modern sensors and weapons, will enhance its capabilities to safeguard national interests and contribute to a 'secure and cooperative maritime environment.' 'Their cutting-edge weaponry and advanced sensors would be instrumental in sustaining regional power equilibrium and ensuring maritime stability,' Vice Admiral Abdul Samad, Deputy Chief of Naval Staff Project-2, said at the launch ceremony in Wuhan, according to a navy statement. The launch took place at Wuchang Shipbuilding Industry Group's Shuangliu Base and was attended by senior officials from both Pakistan and China, including representatives of China Shipbuilding & Offshore International Company Ltd (CSOC). Samad commended the steady progress of the project, praised the work of Chinese shipbuilders and said the Hangor-class program would 'bring a fresh dimension' to Pakistan-China naval cooperation. The submarines are a new generation of diesel-electric attack vessels and equipped with advanced sensors and modern weapon systems to strengthen the country's underwater warfare capabilities. Pakistan signed a contract with CSOC to acquire eight Hangor-class submarines. Four are being built in China, while the remaining four will be produced in Pakistan at Karachi Shipyard & Engineering Works Limited under a transfer-of-technology program. The first two submarines in the series were launched in 2024, with deliveries expected over the next several years.
Arab News
8 hours ago
- Arab News
Pakistani tribunal upholds ruling against Gulf-bound worker medical centers for price fixing
ISLAMABAD: Pakistan's competition appeals tribunal has upheld a ruling against 20 medical centers and laboratories that colluded to fix prices and allocate customers for mandatory pre-departure health tests of workers bound for Gulf countries, the competition regulator said on Friday. The case involves a captive market of low-income Pakistani laborers headed mainly to Saudi Arabia, Qatar, Oman, Bahrain and Kuwait. Under the rules, these workers must undergo tests at centers approved by the Gulf Approved Medical Centers Association (GAMCA), a network of clinics authorized by Gulf states to carry out the mandatory checks. The regulator found the centers and their five regional associations divided customers on a rotational basis, eliminating competition on price and service quality, and in some cases charging for unnecessary repeat tests. 'The CCP's investigation concluded that fee fixation, territorial division and equal allocation of customers by GAMCAs violated the Competition Act, 2010,' the Competition Commission of Pakistan (CCP) said in a statement. 'Any anti-competitive conduct will be dealt with strictly under the competition law,' it quoted its chairman, Dr. Kabir Sidhu, as saying. The competition appeals tribunal upheld the findings but reduced the penalties from 20 million rupees ($70,000) per medical center and 10 million rupees ($35,000) per GAMCA to 2 million rupees ($7,000) percenter and 1 million rupees ($3,500) per GAMCA. The CCP launched its inquiry after a complaint from the Pakistan Overseas Employment Promoters Association, which represents manpower exporters.
Arab News
9 hours ago
- Arab News
Pakistan signs financial advisory deal to privatize state-owned agricultural bank
ISLAMABAD: Pakistan has signed a financial advisory services agreement to begin the strategic privatization of Zarai Taraqiati Bank Limited (ZTBL), the country's largest state-owned agricultural lender, the privatization commission said on Friday. The move comes as Islamabad faces pressure to privatize loss-making or under-performing state-owned enterprises under International Monetary Fund loan agreements in recent years. The government expects the sell-off drive to improve efficiency by putting such entities under competitive, corporate management. ZTBL's privatization comes at a time when Pakistan is striving to bolster food security in the face of extreme climate patterns by modernizing agricultural finance, helping farmers adopt new technologies and practices critical for boosting yields and resilience. 'The privatization of ZTBL is designed to catalyze investment in Pakistan's agricultural future by combining private sector efficiency with the bank's long-standing expertise in agricultural finance,' the commission said in a statement. 'The goal is to ensure farmers have timely access to essential financial resources.' It signed the financial advisory services agreement with a consortium led by Next Capital Limited. ZTBL operates a network of more than 500 branches nationwide, providing credit to small farmers and rural communities. Officials said private investment was expected to expand the bank's product range, introduce modern banking technologies, improve governance and strengthen customer service. Under the newly signed agreement, advisers will conduct due diligence, market sounding and investor engagement, as well as structure and market the transaction and assist in a transparent bidding process.
