KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmad has forecasted that inflation will continue to decelerate in January, although some fluctuations are expected over the next four to five months.

Speaking at an event hosted by the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) on Thursday, Ahmad expressed confidence in the country’s economic recovery and stated that Pakistan is on track to fully resume its economic activity. Governor Ahmad highlighted the significant progress in controlling inflation, which has dropped from a peak of 38% to 4.1% by December 2024. This marked decline is viewed as a positive step towards stabilizing the economy. Ahmad further stated that the SBP aims to keep inflation within the government’s medium-term target range of 5-7% by the end of 2025. He assured the audience that the SBP is fully committed to this goal, emphasizing that it would provide much-needed long-term relief to the economy. However, Ahmad acknowledged that short-term volatility might cause challenges for businesses and the general public, adding that some fluctuations in inflation levels were expected over the next several months due to various domestic and global factors.In response to the improving inflation outlook, the SBP's Monetary Policy Committee (MPC) recently lowered the key policy rate by 200 basis points to 13%, marking the fifth consecutive rate cut since June 2024, when the rate was set at 22%. Ahmad explained that the reduction in the policy rate is part of the broader strategy aimed at stabilizing the economy. By cutting interest rates, the SBP seeks to ease financial conditions, encourage private investment, and stimulate economic growth in the country. Discussing Pakistan's current account, Governor Ahmad noted that it is in "very good condition," supported by strong remittance inflows and an increase in exports. He pointed out that despite this positive trend, exports had not met expectations and that additional efforts were needed to boost export performance. Ahmad emphasized that growing exports would help resolve ongoing balance of payments issues and contribute to long-term economic stability.

On the topic of remittances, the SBP Governor expressed optimism, projecting that remittance flows would comfortably reach the target of $35 billion by the end of the current fiscal year. This would provide vital support to Pakistan's economy, particularly in managing foreign exchange reserves and ensuring a stable external balance. Addressing the issue of Pakistan’s foreign debt, Ahmad provided an update on the country's external liabilities, which had remained stable at approximately $100.8 billion as of September 2024, up slightly from $100 billion in June 2022. He clarified that the modest increase in debt was primarily due to revaluation adjustments rather than new borrowing. Ahmad reassured the audience that Pakistan's foreign debt remains manageable, and the SBP continues to monitor developments closely to ensure that the country remains on a sustainable debt path. Governor Ahmad also called on commercial banks to take additional steps to foster the growth of small and medium-sized enterprises (SMEs), which are essential for job creation and the overall revival of economic activity. He highlighted the importance of expanding credit to SMEs, noting that these businesses form the backbone of Pakistan's economy and their growth is crucial for achieving broader economic recovery. In conclusion, while the path to full recovery remains challenging, Governor Ahmad’s remarks painted an optimistic picture for Pakistan’s economic outlook in 2025. With a focus on inflation control, export growth, remittances, and SME development, the SBP is working towards stabilizing the economy and supporting sustainable growth.