Pakistan on track to meet FY25 targets: SBP Governor

June 17, 2025 (MLN): The State Bank of Pakistan (SBP) is expected to comfortably meet its external debt servicing and foreign exchange reserve targets for FY25, as strong remittances, fiscal discipline, and improving macro indicators reinforce the economic outlook, according to Governor Jameel Ahmad’s remarks at the post-Monetary Policy Committee (MPC) analyst briefing held Monday.

The Governor confirmed that nearly all obligations have been paid or rolled over of the total $28.5 billion external financing requirement for FY25. Only $400 million remains, which he said will be cleared within the final two weeks of June. “We will be fully done for FY25,” he emphasised.

For FY26, a similar level of external repayments is anticipated, with a detailed financing plan to be unveiled at the next MPC meeting, expected in late July.

Remittances & current account

In a major confidence booster, the Governor revealed that worker remittances are now projected to reach $38bn in FY25, up by over $7bn from last year.

“This is a good story,” he remarked while noting that the strong inflows are keeping the current account in surplus territory. While May data, due for release tomorrow (Now today), is expected to show a “slight deficit,” the year is still on track to close with a current account surplus.

Inflation, baseline oil price assumption & growth

On inflation, the Governor reiterated the SBP’s confidence in stabilizing headline inflation to a 5–7% range during FY26, citing improving domestic macro indicators and a disciplined budget.

The MPC has used a baseline oil price assumption of $75/bbl, but is closely monitoring geopolitical risks that could alter this path, he informed.

Real GDP growth for FY25 is expected to clock in at 2.7%, aligning with provisional government estimates. The FY26 target of 4.2% is “challenging but not unachievable,” said the Governor.

FX Reserves, dividends, & OMO

The SBP reaffirmed its foreign exchange reserve target of $14bn by June-end, with planned inflows expected to materialise shortly.

In response to a question, the Governor responded that in line with budgetary estimates, the central bank will transfer Rs2.4 trillion in profit to the government for FY26.

Open Market Operation spiked recently due to Eid-related cash demand, and delays in inflows are expected to normalise in the coming period, he said.

Policy approach

He also clarified that there is no explicit target for the policy rate and that the MPC will remain committed to a data-dependent approach to balance domestic recovery with external risks, especially given oil market volatility and evolving geopolitical dynamics.

To note, in line with the market consensus, the Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 11%.

The Committee noted the following key developments since its last meeting:

• First, the real GDP growth for FY25 is provisionally reported at 2.7%, and the government is targeting a higher growth of 4.2% for next year.
• Second, despite a substantial widening in the trade deficit, the current account remained broadly balanced in April. Meanwhile, the completion of the first EFF review led to the disbursement of around $1 billion, which increased the SBP’s FX reserves to $11.7 billion as of June 6.
• Third, the revised budget estimates indicate the primary balance surplus at 2.2% of GDP in FY25, up from 0.9% last year. For next year, the government is targeting a higher primary surplus of 2.4% of GDP.
• Lastly, global oil prices have rebounded sharply, reflecting the evolving geopolitical situation in the Middle East and some easing in US-China trade tensions.
  
  The outlook is based on multiple risks emanating from potential supply-chain disruptions from regional geopolitical conflicts, volatility in oil and other commodity prices, and the timing and magnitude of domestic energy price adjustments.

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