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Business Recorder
2 days ago
- Business
- Business Recorder
Policy mix to forestall boom-bust syndrome
EDITORIAL: The Governor State Bank of Pakistan while speaking at the launch ceremony of Women Entrepreneurs Finance Code stated that unlike in the previous boom-bust cycles the current policy mix is conducive to lasting rise in economic activity rather than a short-sighted, fragile and populist sugar rush. This observation is backed by an optimism displayed in the last four Monetary Policy Statements (MPS). It is significant that the 11 September 2024 International Monetary Fund (IMF) staff report for the 2024 Article IV consultations and request for an Extended Arrangement under the Extended Fund Facility noted that: 'Economic volatility has only increased over time, with a tight correlation between Pakistan's boom-bust economic outcomes and its macroeconomic policies. The repeated attempts to boost economic activity through fiscal and monetary stimulus have not translated into durable growth, as domestic demand increased beyond Pakistan's sustainable capacity, resulting in inflation and depletion of reserves, given a strong political preference for stable exchange rates. Each subsequent bust has further harmed Pakistan's policy making credibility and investment sentiment.' Tellingly, a detailed analysis by the Fund led to the conclusion that these cycles lead to recurrent balance of payment crises, and what the Governor would do well to note is that the discretionary monetary policy (an example being the demand for a low discount rate to jump-start private sector borrowing that in turn would raise industrial output and growth) induces boom-bust inflation cycles and significantly hinders economic growth. The 16 June 2025 statement issued by SBP maintains that 'the MPC anticipates the industry and services sectors to continue to drive economic growth in FY26. This assessment is supported by the sustained momentum in high-frequency indicators — including credit to private sector, imports of machinery and intermediate goods, and business sentiments — and easing financial conditions,' with higher imports a key component of the boom-bust cycle; and the 5 May 2025 statement making the same optimistic observation, 'incoming high-frequency indicators suggest that economic activity is maintaining momentum, as reflected by rising sales of passenger vehicles and petroleum products (excluding furnace oil), increasing electricity generation, and improving business and consumer confidence.' However, these sentiments are not backed yet by corroborating macroeconomic data particularly large-scale manufacturing sector's growth rate that registered negative 1.52 percent July-April 2025 against 0.26 percent in the comparable period of the year before. And while credit to private sector did double from the 323.5 billion rupees July-June 2024 to 676.6 billion rupees in comparable period of 2025 yet the Governor has not yet refuted claims by independent economists that the rise in private sector credit is linked not to the output sector but to the stocks and securities sector. The Governor further noted that the government and the apex bank remain steadfast in transitioning from recently hard-earned economic stability to a medium term economic transformation adding that this resolve is reflected in (i) prudent and cautious monetary policy though there is no consistency in the rationale provided while taking key discount rate decisions leading to the conclusion that the decisions are made by the IMF staff; (ii) fundamentals aligned exchange rate which has remained steady against the dollar even when the dollar plummeted against all major currencies after President Trump announced the imposition of tariffs; (iii) ongoing fiscal consolidation with sustained above 75 percent reliance on indirect taxes for revenue whose incidence on the poor is greater than on the rich; and (iv) improving debt dynamics which have certainly improved due to a reduction in the discount rate from 21 percent in June past year to 11 percent this year though total debt to GDP has risen to around 76 percent. It is concerning that structural reforms continue to focus on raising revenue primarily through raising tax rates rather than amending the inequitable, unfair and anomalous tax structure, reducing debt by lowering the discount rate (which requires IMF approval) and the 1.2 trillion-rupee circular debt retirement indicates lower interest costs due to the lower applicable discount rate rather than any other management or structural reforms. Debt rescheduling as a means to resolving sustained macroeconomic distortions and inefficiencies is unlikely to generate a lasting rise in economic activity and the focus must now shift to on well-defined structural reforms. Copyright Business Recorder, 2025
Business Recorder
08-07-2025
- Business
- Business Recorder
Economy: SBP governor speaks of policy mix
KARACHI: Governor State Bank of Pakistan (SBP) Jameel Ahmad has said that unlike in the previous episodes of boom-bust cycles, the current policy mix remains conducive to a lasting increase in economic activity rather than a short-sighted, fragile, and populist 'sugar rush'. He was speaking at the launch ceremony of Women Entrepreneurs Finance Code in Karachi, organised jointly by SBP and the Asian Development Bank (ADB) on Monday. The event featured national and international dignitaries who expressed solidarity on the important cause of women's economic empowerment in Pakistan. Governor SBP also assured that SBP is fully committed to undertake structural reforms and lay the foundation for sustainable and inclusive economic growth. Pakistan economy gets macroeconomic stability Jameel Ahmad in his keynote address said that both SBP and the government remain steadfast in their approach to transitioning from recently hard-earned economic stability to a medium-term economic transformation. This resolve is reflected in our prudent and cautious monetary policy stance, and fundamentals aligned exchange rate, and ongoing fiscal consolidation and improving debt dynamics. He added that this approach is helping us ensure overall macroeconomic stability, building fiscal and external buffers and supporting sustainable economic growth. Governor SBP said that with the focus now increasingly shifting towards structural reforms, he believes that this time is indeed different for Pakistan's economy due to the several positive developments on economic front. He mentioned that the average headline inflation has declined to 4.5 percent in FY25- the lowest level in the last nine years and with prudent and coordinated mix of monetary and fiscal policies, inflation will stabilise within its target range of 5-7 percent. The FX market remains stable driven by external account out performance and a high-quality build-up of FX reserve buffers. SBP's FX reserves are now almost five times higher than the low levels at the start of 2023. The current account balance is projected to remain supportive driven by robust remittances and resilient exports-despite rapid growth in both the value and volume of imports in line with ongoing economic recovery, he added. In addition, fiscal policy has proactively supported monetary tightening, as reflected in the second consecutive primary surplus in FY25. Both tax and non-tax revenues have shown sizable growth, while overall expenditures have remained relatively contained. GOP is targeting a higher primary surplus for FY26. Economic growth is showing signs of gradual, consistent, and sustainable recovery. Governor SBP said that unlike in the previous episodes of boom-bust cycles, the current policy mix remains conducive to a lasting increase in economic activity rather than a short-sighted, fragile, and populist 'sugar rush'. He said that economic growth holds little meaning unless it is both sustainable and inclusive. He also emphasised that women entrepreneurs are a powerful engine for economic growth and social progress. He said that supporting WMSMEs aligns closely with SBP's vision to foster a stable and inclusive financial ecosystem conducive to broad-based and inclusive growth. He also appreciated ADB's commitment to support women financial inclusion in Pakistan and reflected on ADB's role in supporting SBP in the adoption and implementation of the Code in Pakistan. In his welcome remarks, the Deputy Governor SBP, Saleemullah shared that SBP has introduced several initiatives to promote women financial inclusion, namely the National Financial Inclusion Strategy (NFIS) and the landmark Banking on Equality Policy (BOE) to embed gender lens in the banks policies, products and roll out strategies. On this occasion, Christine Engstrom, Senior Director Finance ADB, and Wendy Teleki, Head of WE Finance Initiative at World Bank, expressed pleasure on having SBP join the Code as a global signatory. The launch event also featured two panel discussions bringing together policymakers, financial sector leaders, entrepreneurs, and civil society representatives to discuss challenges, share success stories, and explore collaborative strategies for advancing women's entrepreneurship in Pakistan. Copyright Business Recorder, 2025
Express Tribune
07-07-2025
- Business
- Express Tribune
ADB, SBP launch Women Finance Code
State Bank of Pakistan (SBP) Governor Jameel Ahmad has said that the central bank is fully committed to undertaking structural reforms and laying the foundation for sustainable and inclusive economic growth. He was speaking at the launching ceremony of the Women Entrepreneurs Finance Code in Karachi, organised jointly by SBP and the Asian Development Bank (ADB). The event featured national and international dignitaries, who expressed solidarity with the important cause of women's economic empowerment. Jameel Ahmad, in his keynote address, said that both SBP and the government remain steadfast in their approach to transitioning from the recently hard-earned economic stability to medium-term economic transformation. "This resolve is reflected in our prudent and cautious monetary policy stance, fundamentals-aligned exchange rate, ongoing fiscal consolidation and improving debt dynamics." He added that this approach is helping to ensure overall macroeconomic stability, building fiscal and external buffers and supporting sustainable economic growth. With focus now increasingly shifting towards structural reforms, the governor believes that this time is indeed different for Pakistan's economy due to the following facts: The average headline inflation has declined to 4.5% in FY25 – the lowest level in nine years – and with prudent and coordinated mix of monetary and fiscal policies, the inflation will stabilise within its target range of 5-7%. The foreign exchange market remains stable driven by external account outperformance and a high-quality buildup of forex reserve buffers. SBP's reserves are now almost five times higher than the low levels witnessed at the start of 2023. The current account balance is projected to remain supportive, driven by robust remittances and resilient exports, despite rapid growth in both the value and volume of imports in line with the ongoing economic recovery. Fiscal policy has proactively supported monetary tightening, as reflected in the second consecutive primary surplus in FY25. Both tax and non-tax revenues have shown sizable growth, while overall expenditures have remained relatively contained. The government is targeting a higher primary surplus for FY26. Economic growth is showing signs of gradual, consistent and sustainable recovery. Ahmad said that unlike in the previous episodes of boom-bust cycles, the current policy mix remains conducive to a lasting increase in economic activity rather than a short-sighted, fragile and populist "sugar rush".
Business Recorder
07-07-2025
- Business
- Business Recorder
ADB finances $500mn for women's financial inclusion, economic empowerment in Pakistan
The State Bank of Pakistan (SBP) officially joined the global initiative of Women Entrepreneurs Finance Code (WE Finance Code) in collaboration with the Asian Development Bank (ADB) and under the leadership of the World Bank on Monday. The ADB has partnered the initiative with a substantial $500 million financing programme to the government of Pakistan. The funding is aimed at bridging the gender gap and enhancing equality, with a focus on advancing women's financial inclusion and economic empowerment. Global financial institutions' studies estimate that the programme may unlock a potential 30% boost in Pakistan's GDP (gross domestic product), driven by the growth of women in the economy. $350m loan agreement signed with ADB to boost women's financial inclusion As part of the initiative, some 20 banks and other financial institutions operating in Pakistan have committed to supporting the SBP-led effort. Their participation underscores a collective push to improve women's access to finance, particularly by expanding their eligibility for bank loans and other financial services. ADB-representative Christine Engstrom said the regional financial institution is supporting the Women Inclusive Finance Sector Development Programme in Pakistan. 'This is the $500 million programme with the government of Pakistan, which is actually designed to reduce the gender finance gap. This programme combines policy base lending and technical assistance to drive sector wise reforms and to provide access to finance to over 2 million women.' She said women financial inclusion was no more a personal agenda. 'It is a central pillar of economic development'. 'It is essential to drive exclusive growth, especially in the financial system, as millions of women remain excluded from the formal financial sector.' She acknowledged that the SBP initiative of 'banking on equality and policy framework have already begun to shift mindset in institutions, embedding gender inclusion into the DNA of the financial sector'. Citing from studies conducted by global financial institutions including ADB and Islamic Development Bank (IDB), SBP-representative Abid Qamar said that women were empowered and gender parity in workforce could boost the overall GDP like up to $28 trillion globally. 'If we focus on only on South Asia, it can add up to to like half a trillion dollar to the economies of region. And in case of Pakistan of course by reducing this gender gap Pakistan GDP could also be boosted by almost like 30%.' The access to banking services to underbanked and unbanked women through bank branches, ATMs, and loans also support banks to increase their revenue. 'Expanding the financial services to women may increase banking revenue up to like $650 million in Pakistan…this shows the significance of women economic empowerment,' he said. Some 17 million women had been employed in various sectors of the economy in Pakistan out of 79 million working age women, he added. In her recorded video message, WE Finance Secretariat's representative Wendy Teleki said the secretariat had been working for women's financial inclusion and their empowerment across the globe. Financial inclusion of women in Pakistan is a '$500mn market opportunity' In the past around two years, they have launched the refinance code at the World Bank, International Finance Corporation (IFC) and other leading signatory institutions and partners. 'Almost 30 countries and more than 250 financial institutions have signed the code and made commitment to the cause like policy reforms to include women in the financial sector, support SMEs (run by them) and create employment opportunities for them,' she said. 'They (women) also have opportunities to grow if we can remove barriers to growth like access to finance and policy reforms.' The WE Finance Secretariat hopes the code in Pakistan will go beyond banks to include fintech, digital finance institutions, and showing companies and equity funds as well. 'The refinance code is helping us move forward on SGD5, which is about achieving gender equality and empowering all women and girls,' she said. SBP Governor Jameel Ahmad said the launch event of WE Finance Code represented a strategic step towards fostering inclusive and sustainable economic growth by prioritising women's economic participation at the heart of the national development agenda. The case for gender equality is both moral and economic, according to Ahmad. 'No country can thrive when half of the population is under-employed and underserved. In Pakistan, women's labor force participation is just 22% and with only 164,000 women entrepreneurs.' Gender gaps in education, mobility, skills and access to financial services continue to hinder women's full economic participation. It is also one of the major causes of low savings as well as low investment in Pakistan compared to many regional peers. 'SBP will collaborate with financial institutions, regulators, government agencies, private sector and academia to build an inclusive ecosystem for women entrepreneurs,' he said.
Business Recorder
07-07-2025
- Business
- Business Recorder
Boom-bust cycle: SBP advises not to repeat past mistakes of accelerating demand, rapid economic growth
Pakistan will not 'repeat past mistakes such as accelerating demand and economic growth too rapidly', State Bank of Pakistan (SBP) Governor Jameel Ahmad said on Monday. Speaking at the launch of the Women Entrepreneurs Finance Code by SBP, he said he was confident that the ongoing transition from hard-earned economic stabilization to growth would remain sustainable — unlike the recurrent boom-bust cycles witnessed in recent years. He said the strong build-up in the country's foreign exchange reserves (held by SBP) is one of the many reasons behind his confidence for achieving long-lasting economic growth this time, as SBP's FX reserves have surged five times to $14.5 billion at present compared to less than $3 billion at the start of the calendar year 2023. 'This reserve build-up is driven by our FX purchases (from local currency markets including inter-bank market) rather than external debt raised by the commune as was the case between 2015 and 2022,' he said. He added the rate of inflation has come down sharply, the current account has turned into a surplus, and SBP FX reserves are rising. 'The exchange rate is relatively stable and economic growth is also picking up gradually… most importantly, the economic outlook at present is far more promising than a couple of years ago,' he added. As a result of tough but necessary macroeconomic stabilization measures implemented by the SBP and the government, 'we are now out of the difficult period,' he said. 'Economic growth showing signs of recovery' 'The period of stabilization has often been followed by a boom-bust cycle. To avoid repeating these patterns (this time), it is crucial not to repeat past mistakes such as accelerating demand and economic growth too rapidly, especially in inward-looking sectors,' Ahmad said. 'Economic growth is showing signs of gradual, consistent and sustainable recovery. Unlike in the previous episodes of boom-bust cycles, the current policy mix remains conducive to a lasting increase in economic activity rather than a short-sighted, fragile and populist sugar rush…With the focus now increasingly shifting towards structural reforms we strongly believe that this time is indeed different for Pakistan's economy,' he added. Ahmad elaborated that the confidence behind targeting to achieve a sustainable economic growth this time is strongly supported by 9-year low headline inflation reading at average 4.5% in fiscal year 2024-25. 'We are increasingly confident that with prudent and coordinated mix of monetary and fiscal policies inflation will stabilize within its target range of 5% to 7%.' He also said the FX market remains stable. 'The current account balance is projected to remain supportive, driven by robust remittances and resilient exports despite rapid growth in both the value and volume of imports in line with the ongoing economic recovery,' the SBP Governor said. He maintained that the fiscal policy has proactively supported monetary tightening as reflected in the second consecutive primary surplus in fiscal year 2025. 'Both tax and non-tax revenues have shown sizable growth, while overall expenditures have remained relatively contained. The government of Pakistan is targeting a higher primary surplus for the fiscal year 2026.' Lastly, but most importantly, the focus is now shifting towards reforms that address structural issues. 'Efforts to widen tax-based, privatized SOEs (state-owned entities) and liberalized trade will bring greater efficiency, enhance the role of the private sector and improve competition,' he said. The State Bank of Pakistan launched the Women Entrepreneur Finance Code in partnership with the Asian Development Bank with a $500 million loan program to support women-led businesses. Some 20 banks and financial institutions joined the initiative, which was also supported by the World Bank.
