KARACHI: Pakistan’s central bank on Tuesday projected the country’s economic growth rate to remain between four and five percent during the current fiscal year, as it revised its earlier forecast of 3.9 percent due to domestic economic recovery and improved inflation outlook.
The central bank also decided to keep the key policy rate at seven percent, a stance it has been maintaining since June 2020.
“The Monetary Policy Committee [MPC] was encouraged by the continued domestic recovery and improved inflation outlook following the recent decline in food prices and core inflation to keep the policy rate unchanged,” said Governor State Bank of Pakistan (SBP) Dr. Reza Baqir while addressing a virtual news conference in Karachi.
“Besides, the consumer and business confidence have risen to multi-year highs and inflation expectations have fallen,” he said, adding: “Due to these positive developments, growth is projected to rise from 3.9 percent in FY21 to 4-5 percent this year.”
The SBP governor maintained the key risk to economic growth could come from the spike in COVID-19 cases amid a low vaccination rate.
“The MPC felt that the uncertainty created by the ongoing fourth COVID-19 wave in Pakistan and the global spread of new variants warranted continued emphasis on supporting the recovery through accommodative monetary policy,” he added.
Discussing the country’s current account deficit, he said the imports were expected to grow on the back of the domestic economic recovery.
“The MPC noted that the market-based flexible exchange rate system, resilience in remittances, an improving outlook for exports, and appropriate macroeconomic policy settings should help contain the current account deficit in a sustainable range of two to three percent of the GDP in FY22,” he added.
Baqir said that Pakistan’s economic recovery was primarily driven by large-scale manufacturing, construction and service sectors.
He added that growth was further expected to pick up during the current fiscal year due to several measures announced in the budget.
Such measures include increased development spending along with reduced regulatory duties and sales tax on the import of raw materials and capital goods.
“These measures will directly benefit the construction and allied industries, as well as export-oriented industries. Agricultural growth is also expected to contribute favorably [to the economy] despite reported water shortages at the start of the sowing period of Kharif crops,” the SBP governor said.
The governor said that Pakistan’s external position was at its strongest in the last several years.
“This is the lowest current account deficit in 10 years, supported by all-time high exports and remittances. The SBP’s forex reserves rose by $5.2 billion during FY21 to end at over $17 billion or around three months of imports,” he added.
Pakistan’s central bank raises GDP forecast to 4-5% amid domestic economic recovery
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Pakistan’s central bank raises GDP forecast to 4-5% amid domestic economic recovery
- The State Bank of Pakistan decides to retain the key policy rate at seven percent, a stance it has been maintaining since June 2020
- The central bank governor says the risk to economic growth could stem from a surge in COVID-19 cases amid a low vaccination rate
Pakistan PM orders accelerated privatization of power sector to tackle losses
- Tenders to be issued for privatization of three major electricity distribution firms, PMO says
- Sharif says Pakistan to develop battery energy storage through public-private partnerships
ISLAMABAD: Pakistan’s prime minister on Monday directed the government to speed up privatization of state-owned power companies and improve electricity infrastructure nationwide, as authorities try to address deep-rooted losses and inefficiencies in the energy sector that have weighed on the economy and public finances.
Pakistan’s electricity system has long struggled with financial distress caused by a combination of factors including theft of power, inefficient collection of bills, high costs of generating electricity and a large burden of unpaid obligations known as “circular debt.” In the first quarter of the current financial year, government-owned distribution companies recorded losses of about Rs171 billion ($611 million) due to poor bill recovery and operational inefficiencies, official documents show. Circular debt in the broader power sector stood at around Rs1.66 trillion ($5.9 billion) in mid-2025, a sharp decline from past peaks but still a major fiscal drain.
Efforts to contain these losses have been a focus of Pakistan’s economic reform program with the International Monetary Fund, which has urged structural changes in the energy sector as part of financing conditions. Previous government initiatives have included signing a $4.5 billion financing facility with local banks to ease power sector debt and reducing retail electricity tariffs to support economic recovery.
“Electricity sector privatization and market-based competition is the sustainable solution to the country’s energy problems,” Prime Minister Shehbaz Sharif said at a meeting reviewing the roadmap for power sector reforms, according to a statement from the prime minister’s office.
The meeting reviewed progress on privatization and infrastructure projects. Officials said tenders for modernizing one of Pakistan’s oldest operational hubs, Rohri Railway Station, will be issued soon and that the Ghazi Barotha to Faisalabad transmission line, designed to improve long-distance transmission of electricity, is in the initial approval stages. While not all power-sector decisions were detailed publicly, the government emphasized expanding private sector participation and completing priority projects to strengthen the electricity grid.
In another key development, the prime minister endorsed plans to begin work on a battery energy storage system with participation from private investors to help manage fluctuations in supply and demand, particularly as renewable energy sources such as solar and wind take a growing role in generation. Officials said the concept clearance for the storage system has been approved and feasibility studies are underway.
Government briefing documents also outlined steps toward shifting some electricity plants from imported coal to locally mined Thar coal, where a railway line expansion is underway to support transport of fuel, potentially lowering costs and import dependence in the long term.
State authorities also pledged to address safety by converting unmanned railway crossings to staffed ones and to strengthen food safety inspections at stations, underscoring broader infrastructure and service improvements connected to energy and transport priorities.
