State Bank of Pakistan (SBP) Governor Jameel Ahmad has said that achieving inclusive economic growth requires durable macroeconomic stability that uplifts communities and secures prosperity for all.
He was delivering a keynote address at the ninth Annual Microfinance Conference held in Karachi on Thursday. Hosted by the Pakistan Microfinance Network, the conference focused on “Renaissance of Microfinance,” underlining the renewed commitment to leveraging microfinance for inclusive economic development.
Jameel Ahmad said that the difficult, yet necessary, policy and regulatory measures taken in recent years have led to a period of macroeconomic stability. He noted that inflation has declined sharply and is projected to remain in the government’s target range of 5 – 7 per cent over the medium term, notwithstanding some temporary upward pressure on prices due to the recent floods.
He pointed out that the foreign reserves are now almost five times higher than the level recorded in February 2023, reflecting strategic interbank purchases to shore up buffers. He added that ”had we not built up our reserves from interbank purchases, the government would have needed to borrow significantly higher amounts – at higher interest rates – to make timely debt repayments”.
Governor Ahmad stated that SBP’s monetary policy and regulatory efforts have been complemented by sustained fiscal consolidation by the government, which has helped contain demand-side pressures on inflation and the external account. Resultantly, the country’s debt dynamics have also improved considerably over the past three years. He said that economic growth is on the path to recovery and expected to accelerate further in the current fiscal year, notwithstanding the temporary expected losses from the recent floods, mainly to the agriculture sector.
He shared that SBP has made comprehensive revisions to the Prudential Regulations for Microfinance Banks, to bring a shift from a rules-based to a principle-based approach. These reforms included: removal of restrictions on microenterprise lending, allowing greater flexibility, introducing a dedicated Agriculture & Livestock loan category, enhanced loan limits up to Rs5 million for agriculture, microenterprise, housing loans, and Rs500,000 for general loans.
He also shared that SBP has launched a Climate Risk Fund under the World Bank-funded Resilient and Accessible Microfinance Project aimed at supporting two million borrowers through liquidity facilities to mitigate the impact of climate shocks. Further, SBP, with the government support, has launched a Risk Coverage Scheme for Small Farmers and Underserved Areas that offers 10 per cent first-loss coverage and operational incentives to expand lending in primarily underserved regions like Balochistan, Khyber-Pakhtunkhwa, Azad Jammu & Kashmir, and Gilgit Baltistan.
