Governor of State Bank of Pakistan hinted at the slow growth of around 4.5 percent in the current fiscal year 2021. Baqir stated that the current account deficit and inflation pressures would persist as a challenge for the economy.
“We are trying our best to contain the current account deficit through exchange rate and interest rate policies and hope that we will weather it much better than before,” said Baqir.
The official expressed his views at the Swiss embassy on the economic outlook of Pakistan. The event was held by the Swiss ambassador Benedict de Cerjat at his embassy. British high commissioner, European Union ambassador, and representatives of Swiss companies joined the event.
In the opening remarks of the Swiss ambassador, he congratulated the Pakistan Government on the new policy about the complete autonomy of SBP and the continuation of the IMF program. He listed many challenges for Pakistan, including rising inflation, increased current account deficit, and external debt pressure.
SBP Governor expected that this year’s current account deficit would decrease and be lowered to $15 billion compared to $19 billion in 2018. Due to current economic policies, the current account deficit is controlled by-product prices as the non-oil balance is estimated to be in surplus. The IMF had already hinted about rising inflation and increased the current account deficit gap. The international body warned about the current account deficit, which would become 4 percent of GDP in this fiscal year. Inflation is rising, achieving double digits at the beginning of the year. It will sustain in double figures in this year. IMF had already placed a condition for Pakistan to increase the gross official foreign exchange reserves. Before June 30, Pakistan must achieve a figure of $21.2 billion. Pakistan needs $5.5 billion in five months to accomplish the required figure set by the IMF. The projection of inflation would reach 10.2% this year.
The Governor pointed out reducing the growth to 4.5 percent in this fiscal year compared to high growth in last year. The increase of commodities in the international markets contributes to inflation. Pakistan will face inflation as a challenge this year if global markets do not decline product prices. Through solid economic policies, Pakistan would achieve a 5-7 percent inflation rate.
MNA Dr. Ayesha Pasha responded to the Governor’s statement by listing fertilizer shortage and limited large-scale manufacturing barriers to economic growth.
SBP will close all the current accounts of governments and armed forces in commercial banks to fulfill the condition of IMF. SBP will shift all the money from commercial banks into its accounts. The bank official responded to the question of the UK high commissioner about low tax to GDP ratio and power sector problems as both pose a considerable threat to the economy. Pakistan had seen a decline in debt to GDP ratio by 2.9%.
The Finance Ministry submitted the Fiscal Policy Statement 2021-22 in the National assembly. According to the report, per capita debt hiked by 49% to around Rs179,000 in the first three years of the PTI government. Governor said that the outward flow of remittances was increased than the last fiscal year denying the restrictions imposed by the SBP.
Source:
https://tribune.com.pk/story/2341867/growth-may-slow-down-to-45-baqir
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