Economy moving in the right direction: SBP governor
Speaking at the 3rd National Islamic Economic Conference 2025 organized by Saylani Welfare International Trust in collaboration with the National Islamic Economic Forum (NIEF) and Darul Uloom Memon titled 'Towards the Islamic Digital Economy,' Governor SBP, delivered a comprehensive overview of the country's economic progress, the expansion of Islamic banking, and the role of digitalization and the IT sector in national development.
Speaking the conference, he also underlined the importance of launching Sukuk to support Islamic finance and highlighted the steps taken to equip the banking workforce with Shariah-compliant training and frameworks.
Macroeconomic outlook: SBP governor apprises foreign investors
He advocated for simplifying the issuance of Sukuk bonds to further Islamic financial growth and outlined government-SBP efforts to deepen Pakistan's Sukuk market and urged stakeholders to tackle issuance bottlenecks.
The SBP is actively working to simplify the Sukuk structure and streamline the process for issuing new Sukuks, Governor said and added that the SBP and the government are jointly pursuing the transition of public debt towards Sukuk- a Shariah-compliant financial instrument.
'We need to collectively address the underlying challenges to enable the issuance of more Sukuks and offer investors financial products that align with Shariah principles,' he emphasized.
The Governor SBP highlighted that decisive policy actions taken by the government and the central bank have led to marked improvements including a sharp decline in inflation, a strengthened current account balance, and growing foreign exchange reserve
He noted that three years ago, Pakistan grappled with surging inflation and external account imbalances. Through coordinated efforts by the government and the central bank, these issues were addressed effectively. He highlighted that inflation dropped to just 0.3 percent in April 2025, the lowest in over half a century, while the interest rate has decreased from 22 percent to 11 percent. He added that the inflation rate is expected to remain between 5-7 percent by the end of FY25.
In addition, the trade deficit was reached highest ever level and now has been controlled. Since 2022, Pakistan has repaid $100 billion in foreign debt. Foreign exchange reserves have increased from $3 billion to $11 billion, and inflows of home remittances from $30 billion to $38 billion annually, thanks largely to freelancers and overseas workers.
He praised the State Bank's initiatives in Islamic banking, revealing that Pakistan was recognized as the best central bank for Islamic banking efforts by a Malaysian institution. He added that one-fourth of banking deposits in Pakistan are now invested in compliance with Islamic principles.
The governor also discussed the government's 2022 steering committee for Islamic banking transformation, which has held 450 meetings over the past 2.5 years. The State Bank has provided banks with guidance to address challenges, such as ensuring parity in profits between Islamic and conventional banking systems.
'Islamic banking awareness is vital as some remain skeptical and Sylani Welfare's role in economic service and forex earning is commendable', he said.
He stressed the importance of transitioning from conventional to Islamic banking and acknowledged improvements in various industries including textiles and cement. The trade balance has turned into a surplus, and forex stability is yielding positive impacts.
Jameel said the number of Islamic banking branches has surpassed 8,000. Banks need to develop new products, and a legal framework for Islamic banking has been established. Banks have been instructed to match the profit returns of Islamic banking customers to those of conventional banks.
The governor lauded Saylani Welfare Trust for empowering youth through the IT sector, stating that IT and freelancing have become major sources of foreign exchange. He shared that due to the contributions of freelancers and overseas workers, remittances are expected to reach $38 billion by end of this fiscal year.
The Governor SBP emphasized the remarkable progress in Islamic banking and informed that as of March 2025, Islamic banking assets had grown to Rs. 11,300 billion, with deposits totaling Rs. 8,400 billion. Over 8,000 Islamic banking branches are now operational across the country. The State Bank has implemented a Shariah Governance Framework and adopted international standards, especially those by AAOIFI, to guide the sector's development, he said.
He revealed that 25 percent of the total banking assets are now Shariah-compliant, and Pakistan has received international recognition for its efforts in Islamic finance. However, he stressed the need to address public misconceptions and to overcome barriers like the absence of sukuk issuance.
The governor also spoke about the success of the Raast system, which enables real-time fund transfers in just 6 seconds. In 2015, only 16 percent of Pakistan's adult population had access to banking services. This figure has now risen to 64 percent, and the central bank aims to increase it to 75 percent by 2028 under the National Financial Inclusion Strategy.
He encouraged banks to provide more credit to SMEs, agriculture, and housing sectors, while also expanding Shariah-compliant products and services.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
38 minutes ago
- Business Recorder
Pakistan's three Eurobonds trade at over $1 premium for first time in years
KARACHI: For the first time in recent history, Pakistan's three Eurobonds are trading at a premium price of over $1 a unit in international capital markets at present, suggesting the confidence of global investors on the domestic economy has boosted sharply. 'Pakistan's three Eurobonds are trading at premium for the first time after several years,' State Bank of Pakistan (SBP) Governor Jameel Ahmad said while speaking at the monetary policy press conference on Wednesday. SBP keeps policy rate unchanged at 11% The three bonds include the two maturing in September 2025 and April 2026, he said, recalling Pakistan's Eurobonds were trading 'at deep discount – at one-third of their issue price at 37-38 cents in 2023'. Arif Habib Limited, Head of Research, Sana Tawfik, added the Eurobonds maturing in September 2025 and April 2026 closed Wednesday's trade at 100.28 cents and 100.05 cents, respectively, in the international market. The third bond, maturing in January 2029, closed the day trade at 100.74 cents. There are six Pakistan's Eurobonds trading in global capital markets. The total issuance size of the bonds sum at $6.8 billion. They are maturing between September 2025 and April 2051. SBP governor Ahmad said the country's global bonds had revived after two international credit rating agencies upgraded Pakistan's rating to 'B-' from 'CCC+' along with a stable outlook. He said the boost in global investors' confidence - exhibited through the rising Eurobonds - was achieved in the wake of repayment of foreign debt and interest payments on the debt on time and a notable growth in foreign exchange reserves to $14.5 billion in FY25 compared to $9.4 billion in the prior year. Besides, the return of stability in the domestic economy and rupee-dollar exchange rate, and a jump in inflows of workers' remittances to record high at $38.3 billion in FY25 compared to $32.3 billion in FY24 also played pivotal roles. 10-year Eurobond: $1bn repayment made despite dearth of forex Ahmad said Pakistan would repay a total of $1.8 billion to global investors against the maturity of two Eurobonds falling in the current fiscal year 2025-26. The maturity of the two bonds and increase in the country's credit rating may allow Pakistan to raise new debt from global capital markets through selling new Eurobonds in future. Pakistan to repay a net $10bn in FY26 SBP governor said Pakistan was scheduled to repay $25.9 billion, including rollovers, in FY26. Giving a breakup, he said, the expected rollovers amounted to $16 billion in the current fiscal year 2025-26. However, the country has to pay a net $10 billion over the year. This includes repayment of commercial loans at $3.75 billion and interest payment on the overall debt at $4 billion over the year. Pakistan's overall foreign debt has remained stagnant at around $100 billion for the past three years, suggesting the new borrowing was purely being utilised to repay the maturing debt, Ahmad said. Earlier, the debt had surged by on an average $6 billion a year to $100 billion in the seven years duration.
Business Recorder
2 hours ago
- Business Recorder
Business community ‘disappointed' at status quo in policy rate
KARACHI: The business community in Pakistan expressed disappointment over the central bank's decision to keep the policy rate unchanged at 11%, arguing that it had undermined business sentiment and posed challenges for industrialists, entrepreneurs, and investors. The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Wednesday decided to keep the policy rate unchanged at 11%, a decision that contradicted market expectations, which had anticipated a rate cut of around 50 to 100 basis points (bps). 'Consumer price index (CPI), as per government's own statistics, stood at 3.2% in June 2025; but, the policy rate continues to be 11% as of today – which reflects a premium of 780 basis points (bps) as compared to inflation and it makes no economic sense,' Federation of Pakistan Chambers of Commerce & Industry (FPCCI) president Atif Ikram Sheikh said in a statement. Sheikh lamented that after deliberations from the apex trade and industry platform with all industries and sectors, FPCCI had demanded a single-stroke rate cut of 500 basis points during the Wednesday's MPC meeting to rationalise the key policy rate. Pakistan Hosiery Manufacturers and Exporters Association's (PHMA) central chairman Muhammad Babar Khan said maintaining the key interest rate at 11% would hurt the growth of exporters and manufacturers of different sectors. 'The policy rate maintains a higher level in the region which made its extremely challenging for exporters to further enhance their exports or compete with different countries such as Vietnam, Bangladesh, and India,' Khan said. Here is how much key interest rate has moved in last 12 months Pakistan Chemicals & Dyes Merchants Association (PCDMA) chairman Salim Valimuhammad also labeled the SBP decision a setback for business sentiment and industrial growth. In a statement, he argued that lower interest rates were critical to stimulating economic activity, improving access to affordable loans, and fostering job creation. 'This is not a wise decision in my view,' he stated, pointing to the recent decline in inflation as a reason to cut rates. 'Inflation has already come down, and businesses are under enormous pressure. If such high interest rates continue, it will further burden the business community, which is already struggling.' Pakistan's headline inflation clocked in at 3.2% on a year-on-year (YoY) basis in June 2025, a reading lower than that of May 2025, when it had stood at 3.5%, according to Pakistan Bureau of Statistics (PBS) data. On month-on-month (MoM) basis, it increased by 0.2% in June 2025, as compared to a decrease of 0.2% in the previous month and an increase of 0.5% in June 2024. CPI inflation average during FY25 stood at 4.49% as compared to 23.41% in FY24. 'On one hand, the government claims inflation is decreasing, but on the other hand, the interest rate remains unchanged. This policy inconsistency is damaging economic recovery,' PCDMA chairman said. Rationale to maintain interest rate neither convincing nor economically sound: Bilwani Karachi Chamber of Commerce & Industry (KCCI) president Muhammad Jawed Bilwani said even with inflation at its current level or marginally higher, there remained sufficient room to reduce the interest rate to a single digit, as 'many regional economies have done in similar or even more complex economic environments'. 'By missing this critical opportunity to lower rates, the State Bank has not only dampened hopes for economic revival but also imposed a continued and unnecessary burden on an already strained private sector', he said, adding the SBP decision was not only detrimental to domestic businesses, particularly small and medium enterprises (SMEs) and manufacturers, but 'also risks further stifling economic recovery, employment generation, and industrial revival'. He pointed out that across the region and in comparable economies, monetary policy easing was actively being pursued to support growth. 'For instance, India's policy rate stands at 6.5%, Bangladesh around 8.5%, Indonesia at 6.25%, while Vietnam has brought its rate down to below 5%, all significantly lower than Pakistan's,' Bilwani said.
Business Recorder
4 hours ago
- Business Recorder
Pakistan central bank sees FX reserves climbing to over $17bn by FY26 end
KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmad projected on Wednesday that the central bank's foreign exchange (FX) reserves were expected to rise by $3 billion, reaching $17.5 billion by the end of the fiscal year 2025-26. The growth in the reserves would take place despite foreign debt repayments, including rollovers, totalling at $25.9 billion in FY26, he added. 'The FX reserves could be higher than the targeted $17.5 billion in FY26 if Pakistan raised new debt from global capital market through selling Eurobond,' Ahmad said at SBP monetary policy press conference. The central bank decided to keep the key interest unchanged at 11%. The FX reserves stood at $14.5 billion at the end of FY25 on June 30, 2025. He anticipated that Pakistan's GDP (gross domestic product) would grow in the range of 3.25% to 4.25% in FY26. It may be noted that the International Monetary Fund (IMF) has projected Pakistan's GDP growth at 3.6% for FY26. The growth would be supported by revival in agricultural output and continue improvement in industrial and services sectors, SBP governor said. The current account deficit is expected to be in the range of 0-1% of GDP in FY26, ending the cycle of C/A surplus recorded in FY25. The Monetary Policy Committee (MPC) of the SBP noted that year-on-year inflation was expected to mostly remain in the range of 5–7 percent in FY26, though it might cross the upper bound in some months. The MPC emphasised that the outlook was susceptible to multiple risks emanating from uncertain global commodity prices and trade outlook, unanticipated adjustments in administered energy prices, and potential widespread floods.
