ISLAMABAD: State Bank of Pakistan (SBP) Governor Dr. Reza Baqir said on Thursday that Pakistan’s current economic challenges in the form of inflation and current account deficit are determined by global commodity prices. raw materials.
Addressing the event organized by the Swiss Embassy on the economy of Pakistan, Baqir dwelt on how Pakistan has coped with Covid-19, the country’s economic challenges – inflation and deficit of the current account – following the increase in world commodity prices, and whether Pakistan is able to cope with the economic challenges.
The governor said the current inflation challenge is driven, in much of the world, by rising global commodity prices, he said, adding that this perception that inflation in Pakistan was higher was not accurate as some western countries are experiencing even higher inflation like Germany.
He said the current account deficit is also determined by global commodity prices and the policy tools adopted by the central bank and that if oil imports are excluded from the import bill, the current account deficit should be excess.
Baqir further said that policy measures have been taken to reduce the trade deficit and stop the increase in the current account deficit.
He said continued support is being provided fiscally with a continued decline in the primary deficit.
The rise in world commodity prices causes a stir
He said the policies are well suited to deal with the challenge of the current account deficit. Regarding Chinese debts, he said that a loan is a loan and any creditor is first and foremost a creditor and all the debt incurred by Pakistan is reflected in the public debt. He further said that Pakistan reduced its debt during the Covid.
“We have been able to reduce the debt-to-GDP ratio, and going forward, increasing the tax-to-GDP ratio is a committed government priority.”
Earlier, the SBP Governor said he wanted to start by talking about the updated growth figure from the IMF which showed that Pakistan’s growth had not fallen as badly as in the case of many other countries and that in recovery, the country had not done badly and even its growth was slightly higher than that of the United States due to the management of its economic policies.
He said that now the question is whether this growth has come at the expense of fundamentals, fiscal or monetary. He said public debt over the two-year period declined by minus 2.9 percent, adding that while supporting growth, Pakistan’s vulnerability has been reduced, foreign exchange reserves have continued to rise despite the Covid.
He said the role of public health remained critical during Covid and saved the country from the worst the rest of the world has witnessed. If Pakistan’s healthcare system would not have performed well during Covid, Pakistan’s growth would have been worse compared to other countries. Secondly, he said Ehsaas Cash Scheme, a well-targeted policy measure during Covid was able to disburse Rs 12,000 per household in such short time. In addition, the Governor said the timely monetary response and innovative measures by the SBP have helped save jobs and lives and revive investment.
He said the SBP, as policy support measures, introduced refinancing facility, Rozgar program to prevent layoffs, provided relief for loan restructuring, introduced loan principal extension and reduced rate. manager of 625 basis points, and the total amount that was injected was five percent of GDP. About the structural system, Baqir said that TERF has been very successful and has enabled moderation and expansion and financial inclusion is another area and now the government is giving a subsidy on the interest rate to the group at low income on the mortgage. The SBP is promoting affordable houses under Mera Pakistan’s ‘Mera Ghar Scheme’ and Rs 131 billion has been approved for this.
He said the central bank had targeted commercial banks for agricultural credit. He said the central bank backs a 100% single treasury account.
The Governor of the State Bank said that the licensing framework for digital banking, Raast, etc. had been launched. He said the first time loans to SMEs had been introduced without any collateral was the Green Pakistan concessional credit scheme for renewable energy.
In his opening remarks, the Swiss Ambassador said that the Pakistan Swiss Business Council, which was established in 2008 with more than 50 companies and there has been a 22% increase in exports from Pakistan to Switzerland and Interestingly, these exports to Switzerland are about 60% textiles, and if Pakistan is successful in its exports, Switzerland will also benefit in terms of machinery exports to Pakistan. He further said that Switzerland is the sixth largest source of foreign direct investment in Pakistan after China, USA, Netherlands and Singapore etc.
Copyright Business Recorder, 2022