KARACHI: The State Bank of Pakistan (SBP) governor has claimed that the country has taken right decisions for reviving the slowing economy as their implementation has started bearing fruit.
“I would like to tell you that today (Wednesday) we have turned in the right direction,” remarked SBP Governor Dr Reza Baqir, who had resigned from IMF before becoming the governor in May, after a flag-hoisting ceremony at the central bank to mark the 73rd Independence Day on Wednesday.
“If we continue our journey with consistency in the direction we have taken, then we will definitely achieve the destiny of progress and prosperity,” he said, according to a press statement. The projects that the economic team of Pakistan was implementing were bringing stability to the country. There had been considerable stability and on that basis the nation would achieve economic growth, which would benefit the low income and middle class, he added.
To recall, Pakistan signed the 13th loan programme since 1988 with the IMF worth $6 billion in May. The international financial institution released the first tranche of $991.4 million (SDR 716 million) of the 39-month loan programme in the second week of July.
The loan programme binds the government to undertake structural reforms. These included an increase in the key interest rate to an eight-year high of 13.25% in July, depreciation of the rupee by 32% to Rs160 to the US dollar in FY19, upward revision in power and gas tariffs and an ambitious tax-collection target of Rs5.55 trillion for the current fiscal year among other tough conditions for steering the economy out of the crisis. The reform programme has so far managed to narrow down the historically high current account deficit and has helped the inflow of significantly higher remittances from overseas Pakistanis in July – the first month of the current fiscal year 2019-20.
However, the reform programme has resulted in a slowdown of the economy to a nine-year low of 3.3% in the fiscal year that ended on June 30, 2019 and pushed inflation into double digits – 10.3% – in July after a gap of 68 months.
“It is true that even today our country is passing through a tough situation,” Baqir said. “The economy has weakened. There is also inflation and unemployment. Common people are uncertain. But today, I can say with certainty that these conditions are changing and that they are improving. If we acted with unity and faith like we did at the time of Pakistan movement, the prevailing conditions would surely change.”
He said he had spent much of his life at two international financial institutions, including the IMF and World Bank. “In this experience of 20 years, I have come to the conclusion that … those countries which moved ahead with courage and fought hard to overcome the problems, they succeeded.”
“Consistency in our policies is our biggest challenge. If there is continuity in policies, I have no doubt that our future is bright,” the SBP governor remarked. When Pakistan got independence in 1947, this beautiful country faced many difficulties in the beginning. One of the major challenges the nation was faced with was that it did not have its own central bank, the State Bank, in 1947. In the first few months of independence, the Reserve Bank of India was controlling Pakistan’s money supply. This was a huge problem.
“When SBP was established in 1948 and the country printed its own currency note, it was a declaration of our economic independence and sovereignty. Therefore, the note…is a sign of our independence like Pakistani flag.”
Published in The Express Tribune, August 15th, 2019.