State Bank of Pakistan (SBP) Governor Jameel Ahmad expects the economy to grow as much as 4.75 per cent this fiscal year, pushing back against a recent downgrade by the International Monetary Fund (IMF).

In written responses to Reuters, the SBP chief argued the recovery is broader and more durable than headline export data suggest.

The central bank raised its FY26 growth forecast to 3.75–4.75pc at its January meeting, 0.5 percentage points higher than its previous range, despite a contraction in exports in the first half of the year and a widening trade deficit.

The governor said differences in projections were not unusual and reflected timing issues, including the IMF’s incorporation of flood-related assessments in its latest outlook.

“All these sources and indicators, along with FY26-Q1 data, point to a broad-based recovery in all three sectors of the economy,” he said.

He added that the SBP believed that agricultural activity had remained resilient despite floods and “it is even performing better than its targets”.

He added that financial conditions had eased significantly following a cumulative 1,150-basis-point cut in the policy rate since June 2024, and that the full impact was still feeding through.

This, he said, was supporting growth while preserving price and economic stability.

The SBP last month held its benchmark rate at 10.5pc, defying expectations for a cut.

The divergence with the IMF comes at a delicate moment for Pakistan, which is emerging from a balance-of-payments crisis under a $7 billion IMF programme.

Export drag, remittance cushion

Pakistan’s previous growth spurts have often led to currency pressure and a decline in foreign exchange reserves, making the sustainability of the current rebound a key question for investors.

Ahmad said high-frequency indicators and 6pc growth in large-scale manufacturing in July-November point to strengthening demand, while agriculture has remained resilient despite last year’s floods, he said.

While exports declined in the first half of the fiscal year, Ahmad said the fall reflected low global prices and border disruptions rather than softer activity.

He said the current account deficit should stay within 1pc of the gross domestic product (GDP), as strong remittances offset the wider trade gap and lift reserves above programme targets, with further gains expected due to Eid-related inflows.

“Additionally, if the government decided to tap global capital markets for any debt issuance, then that would be on the upside of our current assessment,” he said.

Pakistan plans to issue panda bonds, a yuan-denominated debt sold in China’s domestic market around the upcoming Lunar New Year, as part of efforts to diversify external financing and broaden its investor base.

He said the SBP has been consistently purchasing dollars in the interbank market to strengthen foreign exchange buffers, with data published regularly.

He said that while economic stability has improved, structural reforms remain key to sustaining stronger growth and improving productivity.

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Pakistan’s benchmark stock exchange, KSE-100, closed in the green on Wednesday, up 896.25 points from its previous close of 182,153.55 points.

The index rose 0.49 per cent, hitting an intraday high of 183,801.70 points and a low of 182,054.64 points. The year-to-date change was 5.17pc while the 1-year change was 61.98pc.

Trading volumes stood at 350,081,145 with a value of Rs24,924,229,716.

The top active stocks were led by K-Electric Limited with a volume of 120,603,034, declining 0.35pc to Rs8.60, followed by Cnergyico PK Limited with a volume of 81,776,987, falling 1.09pc, and First National Equities Limited with a volume of 51,954,245, staying steady at Rs1.56.

The top advancers were led by Amtex Limited with a volume of 23,061,382, rising 23.20pc to Rs5.31, followed by Paramount Spinning Mills Limited with a volume of 85,825, rising 12.89pc to Rs6.57, and Hira Textile Mills Limited with a volume of 792,443, increasing 12.32pc to Rs4.74.

The top decliners were led by First Tri-Star Modaraba with a volume of 45,256, falling 8.48pc to Rs35.51, followed by Shams Textile Mills Limited with a volume of 2,653, falling 8.45pc to Rs28.49, and Tariq Corporation Limited with a volume of 646,475, declining 7.79pc to Rs20.

Topline Securities noted that “support from major heavyweights, ENGROH, LUCK, FABL, MCB, and BAFL, underpinned the market’s performance, jointly adding 920 points to the benchmark”. In contrast, the securities firm said that “BAHL, PPL, and UBL weighed on the index, collectively trimming 311 points from the day’s gains”.

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Oil prices gained on Wednesday, buoyed by escalating risk as US–Iran talks remained tenuous, while signs of an easing surplus spurred by better demand support from India also added strength.

Brent crude oil futures were up 57 cents, or 0.83 per cent, at $69.37 a barrel by 07:11 GMT. US West Texas Intermediate crude rose 56 cents, or 0.88pc, to $64.52.

“Oil retains a bullish tail-risk bid as US-Iran talks continue but remain fragile, keeping the Strait of Hormuz risk premium supported amid ongoing sanctions pressure, tariff threats tied to Iranian trade, and heightened US regional military posture,” LSEG analysts wrote in a report.

Iran’s foreign ministry spokesperson said on Tuesday that nuclear talks with the US allowed Tehran to gauge Washington’s seriousness and showed enough consensus to continue on the diplomatic track.

Diplomats from Iran and the US held talks in Oman last week in an effort to revive diplomacy, after US President Donald Trump positioned a naval flotilla in the region, raising fears of new military action.

While oil prices first eased after Oman’s foreign minister said discussions tied to the US-Iran talks with Iran’s top security official were productive, hopes of a peaceful resolution were later dashed following reports that the US may send a second aircraft carrier to the Middle East if talks fail, ANZ analysts said in a note.

Trump said on Tuesday he was considering sending a second aircraft carrier to the Middle East, even as Washington and Tehran prepare to resume negotiations aimed at averting a new conflict.

Also supporting oil prices were signs of easing surplus, as markets absorbed some surplus barrels seen in the last quarter of 2025.

“With mainstream oil on water returning to normal levels and demand for it in India rising, oil prices are likely to remain supported in the near term,” Vortexa market analyst Xavier Tang said.

Indian refiners are avoiding Russian oil purchases to help New Delhi seal a trade pact with Washington, in turn stepping up purchases of oil from the Middle East and West Africa.

Traders are also waiting for weekly US oil inventory data from the Energy Information Administration on Wednesday.

Analysts polled by Reuters estimated on average that crude inventories rose by about 800,000 barrels in the week to February 6, while distillate and gasoline inventories likely fell by about 1.3 million barrels and 400,000 barrels, respectively.

US crude inventories rose by 13.4m barrels in the week ended February 6, market sources said, citing American Petroleum Institute figures on Tuesday.

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