ISLAMABAD: Governor State Bank of Pakistan (SBP), Jameel Ahmad, has said that inflation in Pakistan has declined sharply, reaching a two-year low of 20.7 percent in March 2024 from the highest of 38 percent in May 2023.
The Governor stated this while meeting key international investors during multiple events organized by leading global banks and financial firms, including JP Morgan, Citibank and Jefferies, on the sidelines of the IMF-World Bank Spring Meetings in Washington DC.
The Governor apprised the participants about the substantial improvement in the macroeconomic outlook of Pakistan being achieved over the past year as a result of a prudent monetary policy, supported by firm fiscal consolidation and the beginning of the implementation of key structural reforms.
Regarding inflation he said the deceleration in inflation is broad-based, reflecting the combined impact of monetary tightening, fiscal consolidation, ease in import supplies, improved agriculture output and base effect. More importantly, core inflation declined markedly, reaching 15.7 percent in March, after persistently staying above 20 percent throughout last year.
Governor Highlights Decline in Current Account Deficit
Jameel Ahmad informed the participants that the external sector has also stabilized, as reflected in the sharp reduction in the current account deficit (CAD) to $1 billion during Jul-Feb (FY24) from $3.8 billion in the same period last year.
In addition to stabilization policies, improved agriculture output has contributed to higher food exports, while lowering the import demand of Agri commodities like wheat and cotton. Workers’ remittances have risen consistently since October 2023 on a year-on-year basis, driven by robust incentives and regulatory measures to divert inflows towards formal channels.
These qualitative improvements in the external account have allowed the SBP to more than double its FX reserves from January 2023 ($3.1 billion) to around $8 billion on 12 April 2024 despite the repayment of a $1 billion Eurobond on the same day. At the same time, the SBP’s forward liabilities have also reduced significantly from US$ 5.7 billion in January 2023 to US$ 3.4 billion in February 2024.
The Governor also expressed his view about the efforts of SBP to provide a conducive macroeconomic environment for the private sector to invest in the economy. He highlighted the widespread adoption of digital technologies to address gaps in access to financial services and to revolutionize the domestic payments system.
