Inflation, financial sector top priorities

SBP deputy governor says supporting govt’s growth policies comes at third place

Pakistan’s central bank has said that controlling inflation and having a vibrant financial sector are the top two priorities while supporting the government for implementing its economic growth policies comes at third place.

Speaking at the sixth “Pakistan Leadership Conversation 2023”, organised by the ACCA on Wednesday, State Bank of Pakistan (SBP) Deputy Governor Sima Kamil said that the central bank had three clear objectives at present.

“First (is) price stability, second (is) financial sector stability, (and third is) supporting the government’s economic growth policies as long as first two objectives are not compromised.”

She said the central bank had planned to deploy Big Data and artificial intelligence (AI) technologies in the near future to improve work on price stability, as stable inflation would provide a strong basis for sustainable economic growth.

“We at SBP are now strengthening our statistical department. In future, we will utilise Big Data and AI to improve the quality of data for measuring CPI for inflation while tracking multiple layers of non-traditional data using satellite images…,” she said.

“We have a team of people who will meet small and large-scale businesses to access and gain economic intelligence on consumer demand, manufacturing, construction, capacity utilisation, and investment plans. Such assessments will cover current and future conditions of the state of Pakistan’s economy,” she added.

She stressed the need for working on de-carbonisation and digitalisation of society and the economy, as they ensured a better future.

The SBP deputy governor said that the central bank’s monetary policy statement (MPS) not only discussed the downside and upside risks to key macroeconomic indicators but also identified factors that would impact the future.

“For example, global commodity prices, and we have to monitor those. Accordingly, the decisions, we try to make their database and the (key policy) rate hike is tailoured to the unfolding situation,” she said.

“Our decisions and communications during uncertain times must be clear and measured.”

Kamil said there were many uncertainties around the globe and in Pakistan. In the global economy, there was a pandemic in recent times. “In Pakistan, we dealt with it quite well and it was a great challenge we were facing. There was a global commodity super cycle (high inflation) and then the Russia-Ukraine conflict, which resulted in high global commodity prices and affected energy and food supplies.”

“At home, we had political uncertainty, delay in the International Monetary Fund (IMF) ninth review as well as high inflation, depletion in foreign exchange reserves, and depreciation of the currency. As we thought we were adjusting to these challenges, we had floods.”

She said that in such uncertain times, steps to build economic resilience are best taken before the crisis begins; “it is a measure of your success in how you cope with the situation”.

“We have to build our basic risk recognition conserving liquidity, maintaining solvency, and protecting your future.”

She added that the leadership in uncertain times has to be agile yet measured. Leaders must resist two things, oversimplification of the problem and blowing the risks out of proportion as well.

“Your decisions and communication in uncertain times must be clear and measured,” she said, adding that in crisis it was not possible to keep everyone happy, so “we need to have the courage to set priorities”.

Published in The Express Tribune, February 23^rd, 2023.

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