Macroeconomic stability key to inclusive growth: SBP Governor

October 9, 2025 (MLN): Lasting macroeconomic stability remains vital for achieving inclusive and sustainable economic growth in Pakistan, said State Bank of Pakistan (SBP) Governor Jameel Ahmad at the 9th Annual Microfinance Conference held in Karachi.

He highlighted the importance of financial inclusion and continued regulatory reforms in empowering communities, fostering entrepreneurship, and promoting shared prosperity across the country.

The conference, hosted by the Pakistan Microfinance Network, was themed “Renaissance of Microfinance,” highlighting the sector’s renewed commitment to driving inclusive development.

Macroeconomic Recovery Underway

Governor Ahmad pointed to encouraging signs of macroeconomic recovery, attributing recent stability to difficult but necessary policy and regulatory measures implemented over the past few years. He noted a sharp decline in inflation, which is projected to remain within the government’s medium-term target range of 5–7 percent—despite temporary price pressures following the recent floods.

In the external sector, Pakistan’s foreign exchange reserves have shown a marked improvement—now nearly five times higher than in January 2023. The Governor credited this to strategic interbank purchases of foreign currency, which have strengthened the country’s buffers and reduced the need for costly external borrowing.

“These strategic purchases have helped the government avoid significantly higher borrowings at elevated interest rates,” he noted.

Improved Debt Dynamics and Growth Outlook

Complementing the SBP’s efforts, sustained fiscal consolidation by the government has helped reduce inflationary and external account pressures. As a result, the country’s debt profile has improved considerably over the past three years. Despite flood-related challenges, particularly in the agriculture sector, economic growth is projected to accelerate in the current fiscal year.

Microfinance as a Pillar of Inclusive Growth

Reflecting on two decades of progress, Governor Ahmad reaffirmed SBP’s commitment to microfinance as a tool for inclusive development. He announced a comprehensive overhaul of the Prudential Regulations for Microfinance Banks, shifting from a rules-based to a principle-based regulatory framework. Key reforms include:

• Removal of restrictions on microenterprise lending
• Introduction of a dedicated Agriculture & Livestock loan category
• Increased loan limits of up to Rs5 million for agriculture, microenterprise, and housing loans
• Enhanced general loan limits up to Rs500,000

Climate Resilience and Risk Mitigation

Addressing the growing impact of climate change, the SBP has launched a Climate Risk Fund under the World Bank-funded Resilient and Accessible Microfinance Project.

This initiative aims to support two million borrowers with liquidity facilities to cushion the impact of climate-related shocks.

Additionally, a Risk Coverage Scheme for Small Farmers and Underserved Areas, developed in collaboration with the Government of Pakistan, provides 10 percent first-loss coverage and operational incentives to expand lending in underbanked regions, including Balochistan, KP, AJK, and Gilgit-Baltistan.

Progress in Financial Inclusion

Governor Ahmad highlighted strong progress under the National Financial Inclusion Strategy (NFIS) 2028.

Between 2018 and June 2025, financial inclusion rose from 47 percent to 67 percent, while the gender gap in financial access dropped from 47 percent to 30 percent.

He credited this progress to key digital initiatives such as:

• Raast (Pakistan’s instant payment system)
• Asaan Mobile Account
• Roshan Digital Account
• The launch of Digital Banks
• The Banking on Equality Policy, aimed at promoting women’s financial inclusion

Looking ahead, the NFIS 2028 targets 75 percent overall financial inclusion and a further reduction of the gender gap to 25 percent by 2028.

Call to Action for the Microfinance Sector

In his concluding remarks, Governor Ahmad urged microfinance institutions to strengthen risk management through better use of digital tools and alternative data for credit scoring, robust internal audits, staff training, and adequate liquidity buffers.

He emphasized the importance of sound corporate governance, transparent practices, and climate-risk mapping for ensuring long-term sector resilience.

“Together, we can ensure that microfinance continues to play its vital role in fostering inclusive, resilient, and sustainable growth,” he said.

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