A report issued by the State Bank of Pakistan (SBP) governor for the fiscal year 2023-24 (FY24) reveals significant improvements in the country’s key macroeconomic indicators after a challenging period. The report attributes these advancements to fiscal consolidation, tight monetary policy, softer global commodity prices, better agricultural production, and reduced external account pressure, which collectively led to inflation deceleration, a build-up of foreign exchange reserves, and market stability.
The Governor’s Annual Report (GAR), published under the SBP Act, requires the governor to submit an annual report to the Parliament on the Bank’s objectives and the state of the economy. It highlights improvements in the current account, moderate gross domestic product (GDP) growth, and a recovery in Large Scale Manufacturing (LSM) production during FY24. The national consumer price index (CPI) inflation decreased, with moderate agriculture-led GDP growth supported by a gradual recovery in large-scale manufacturing against a sharp contraction in FY23.
The report noted that the central bank maintained a cautious approach to monetary easing, keeping the policy rate unchanged at 22% until nearly the end of FY24 to mitigate inflationary pressures. The gradual easing in both headline and core inflation led to a reduced policy rate of 20.5% in June 2024. This approach, combined with the first primary surplus in 17 years and a notable decline in public debt in terms of GDP, aligned fiscal policy with the tight monetary policy stance.
Official inflows from multilateral and bilateral external creditors following the Stand-By Arrangement (SBA), deposits from friendly nations, and the government’s decision to seek an Extended Fund Facility from the International Monetary Fund (IMF) buoyed market sentiments and contributed to exchange rate stability. The economy also benefited from lower commodity prices and slightly higher global GDP growth.
The financial sector showed resilience, with continued provision of credit and financial services, notable growth in total banking sector deposits due to elevated interest rates, and efforts towards financial inclusion and digitisation of payments. Growth in banking sector loan delinquencies remained contained, while capital adequacy ratio, asset quality, and liquidity indicators improved.
The report highlighted the launch of SBP’s Raast “Person-to-Merchant” service, set to accelerate business transaction digitisation in Pakistan through payments via QR Codes, Raast Alias, IBAN, and Request to Pay. Additionally, a key achievement was the signing of a memorandum of understanding (MoU) with the Arab Monetary Fund (AMF) to integrate the Raast payment system with Buna, AMF’s cross-border payment system.
