Country’s debt level, balance of payments under control, says SBP governor

The State Bank of Pakistan (SBP) Governor Jameel Ahmed on Thursday said the country was meeting its economic targets, with its debt level and balance of payments still under control.

In 2023, Pakistan experienced one of its worst economic crises in decades and all-time high inflation, with its foreign exchange reserves dwindling to $4.6bn — barely enough to cover three weeks’ worth of imports.

This prompted the government to seek an International Monetary Fund (IMF) bailout to support its balance of payments (BoP) crisis.

The IMF, which approved a $7bn rescue package for Pakistan, expects the country’s growth rate to gradually improve to 4.5pc by 2029.

During a press briefing today, the SBP chief highlighted that the country’s external debt level had remained the same as it was in 2022.

“Overall, Pakistan’s foreign debt volume has improved significantly,” he said, highlighting that the actual foreign debt stood at more than $100.08 billion.

“Foreign debt has also increased by 500 million dollars due to revaluation of debt,” he stated, adding that he hoped that “Pakistan’s current account will remain in surplus in December as well”.

He added that the money borrowed this year was mostly through multilateral institutions and that short-term debt was being paid by long-term debt.

“[As a result], debt servicing would improve and the balance of payments situation will be better,” he said.

Ahmed highlighted that the biggest challenge faced by the authorities was the balance of payments, however, he said the country had enough dollars to meet external demands.

“The issue of balance of payments rises when we exceed growth by 4pc and we don’t have the foreign exchange component capacity to meet that, then that growth turns unsustainable,” he explained, adding that the balance of payment issue also impacted industries.

“Growth should be sustainable because if it’s not sustainable, we will be back to square one,” he said, highlighting that exports would need to be increased to make growth sustainable.

On the business side, the SBP chief said business confidence would improve and foreign direct investment would follow once the economy improved.

Furthermore, Ahmed said that there were little hiccups in foreign investors’ profit repatriation, highlighting that while the foreign investors’ dividend repatriated stood at $331 million, in 2024 $2.2bn were repatriated.

“This year, $1.1bn have been already repatriated — as of right now, foreign investors don’t have an issue with dividend repatriation,” he said.

“This year’s current account and inflation will be better, as I already told you inflation may have some fluctuations,” he said.

The SBP chief reiterated that the central bank’s inflation target was estimated to be 5 to 7 per cent, adding that if “the pace of inflation is controlled, then other things will also be better”.

The CPI inflation had surged above 10pc in November 2021 and remained in double digits for 33 consecutive months until July. In between, it peaked at 38pc in May 2023, driven by unprecedented food and energy prices.

On other positive developments, Ahmed said that remittances were stabilising and were expected to cross $35bn in this financial year.