SBP maps out research priorities on inflation, financial depth

June 11, 2026 (MLN): The State Bank of Pakistan has launched its  Research Agenda for 2026-2029, a comprehensive three-year roadmap structured around three strategic themes.

Inflation dynamics and monetary policy, financial sector deepening, and structural transformation with plans to fund select priority research and invite collaboration from academics, policy researchers, and government bodies at both individual and institutional levels.

In a foreword to the document released in June 2026, SBP Governor Jameel Ahmad said the agenda aims to identify underlying factors that weaken the efficiency of the regulatory framework and the effectiveness of policy instruments, enabling more informed, timely, and effective policy and regulatory responses.

The agenda is aligned with SBP's statutory objectives and the SBP Vision 2028.

Under the first theme, monetary policy transmission is identified as a core research priority, with the agenda flagging structural, institutional, and market frictions including informality, financial access constraints, and segmentation as factors that weaken and delay transmission.

Key research questions include how non-linearities and asymmetries arising from shock size, shock type, and prevailing macroeconomic conditions shape the strength and speed of transmission across key channels.

The agenda also calls for research into the macroeconomic implications of SBP's monetary policy response to supply shocks, particularly with respect to inflation dynamics and central bank credibility.

The agenda further asks whether flexible inflation targeting is an optimal monetary policy regime for Pakistan, and how key design features including the inflation target level, tolerance band, and policy horizon should be calibrated given the economy's structural characteristics.

It also raises questions about the potential role of a central bank digital currency, the expansion of digital financial services, and investments in virtual assets, and their implications for monetary policy transmission and financial stability.

Climate change is explicitly identified as introducing new sources of volatility and persistence in inflation, requiring systematic incorporation into policy analysis.

On the formation of inflation expectations, the agenda asks what factors drive expectations among different segments of economic agents, whether these are adaptive or forward-looking, and how SBP's communications strategy can better anchor expectations and strengthen transmission.

SBP also plans to reassess and strengthen its modeling and forecasting framework, extend the policy-relevant forecasting horizon, and integrate new data sources including big data and business intelligence tools such as the Economic Agents Network.

Under the second theme on financial sector deepening, the agenda highlights persistent gaps in credit penetration, financial inclusion, and efficiency, with the banking system continuing to dominate while capital markets and non-bank financial institutions remain underdeveloped.

It identifies the need to separate structural bottlenecks including institutional weaknesses, concentration, and informational frictions from cyclical factors such as tight liquidity, high inflation, and exchange rate pressures that repeatedly affect bank risk-taking and asset mix.

Key research questions here include the impact of the composition of banks' funding on credit allocation to the private sector, whether SBP's liquidity management framework affects deposit mobilization, and how the minimum deposit rate affects monetary policy transmission and financial sector stability.

The agenda also asks how macroprudential tools interact with monetary policy and how their coordination can be optimized to achieve both price and financial stability.

Separately, it calls for a comparative efficiency analysis of Islamic versus conventional banks in Pakistan in terms of cost, pricing, credit allocation, and resilience to financial shocks.

The third theme on structural transformation focuses on breaking Pakistan's recurring boom-bust cycles.

The large undocumented economy is flagged as undermining the reliability of macroeconomic indicators and weakening policy transmission, with the agenda prioritizing research on informality and reforms to promote formalization, including tax simplification, digitalization, and streamlined regulations.

On external sustainability, the agenda calls for analysis of how the composition and stability of financial inflows including foreign direct investment, portfolio flows, and external borrowing affect macroeconomic resilience, and what constraints prevent private foreign inflows.

It specifically asks whether workers' remittances act as a macroeconomic boon or bane for external sustainability.

The agenda also covers export diversification, evolving global value chains, technological change, migration, demographic transitions, and AI adoption as areas requiring focused research to address skills gaps, enhance firm productivity, and improve labor market outcomes.

The short- to medium-term macroeconomic effects of Pakistan's transition to a low-carbon economy are also listed as a priority research question.

SBP said it plans to fund some priority research questions and may update the agenda over time as gaps are addressed or economic and financial sector conditions evolve.

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