STATE Bank Governor Jameel Ahmed appears to be quite optimistic over recent economic gains. That is not unusual; after all the nation has made a comeback from the edge of default. Speaking with business leaders in Karachi the other day, he said the policy measures (implemented by the bank) have set the stage for full restoration of economic activities in the country, adding that an uptick in remittances and a dip in inflation would lend (further) stability to the economy this year. There are signs that the country’s economy has stabilised after nearly three years of a full-blown crisis. Indeed, the role of the SBP in pulling off this stability cannot be overstated. Headline inflation is down to just 4.1pc and is expected to fall further to around 3pc this month, the rupee-dollar exchange rate remains stable, the haemorrhage of foreign exchange has been stemmed, the country’s international reserves have grown from $3bn to over $11bn despite debt payments, and the current account is running a surplus on soaring remittances and somewhat improved exports. The interest rates are coming down and private credit is said to be picking up pace. Today, the economic environment is a lot less volatile and uncertain than it was even a few months ago.

These are all positive developments and must be appreciated. That said, the recovery remains fragile and dependent on bilateral debt rollbacks and IMF crutches. The drying official and private capital inflows offer little reassurance about the future. The economy still remains trapped in a low-growth equilibrium despite improving macro indicators. Many believe that growth will remain elusive for some years, at least as the economy is yet to recover the kind of strength it needs to support faster expansion without hitting yet another, deeper crisis. The government is slow in implementing structural reforms and the price of this inaction is being borne by citizens and organised businesses. Rather, the ruling PML-N appears divided over reforms needed to put the economy on a sustained growth path and showing signs of impatience with the stabilisation policies due to political challenges from its rivals in Punjab. A lot of hope is attached to the promised investments from the Gulf nations, which the ruling party policymakers expect could offer them space to pursue faster growth. Until that happens, they can try selling ambitions like Uraan Pakistan.

Published in Dawn, January 11th, 2025