Dr Reza Baqir, Governor State Bank of Pakistan (SBP) is confident that the International Monetary Fund (IMF) will revive the $6 billion loan programme as Pakistan has fulfilled all ‘preconditions’.
In an interview with Bloomberg Television, while replying to a question related to the IMF program, Governor SBP said: “We are confident it (IMF Program) will revive as some of the key measures recently taken by the government have been in the direction to fulfil the IMF’s prior actions”.
He further said that Pakistan is also tapping international capital markets and then also hoping that other multilateral institutions such as the World Bank and ADB will also resume their financing operations for Pakistan.
Replying to a question related to risks to GDP growth, Governor SBP said that key risk on the domestic front is rising cases of Omicron. However, he was confident that Pakistan will tackle this wave successfully like previous waves.
On the external front, he identified three risks including uncertain oil prices, faster than anticipated adjustment of global interest rates and geopolitical situation in Europe. If oil prices continue to rise and rise steeply that will be a major risk for Pakistan like other oil-importing emerging markets, he said.
Talking on amendments in the SBP Act, he clarified that this is not the first time that State Bank’s Act is being amended. It was also amended in 2015 and 2012, he mentioned.
He further said that each time the purpose of the amendment was to give more operational autonomy to the central bank. The current amendment will provide clarity to goals of the central bank and these goals have been defined as price stability, financial stability and supporting growth. Second key measure is to improve and strengthen the accountability of SBP, he added.
“We think if it passed it will bring legislation more in line with international practices,” he said.
Talking about the exchange rate, Governor SBP said that before June 2019, Pakistan’s exchange rate was fixed, while currently Pakistan has a free-float exchange rate. During the last calendar year Pakistan’s exchange rate was 163 compared to 161 the previous calendar year, which means depreciation is one percent.
On day to day basis the rupee has been recently adjusted but again it has in line with several emerging markets countries and also largely it’s a result of very high commodity prices that has jacked up import bill and it is help full for the rupee to adjust in such circumstances to keep our CA deficit sustainable, he further explained.
This report was first published in Business Recorder on Jan 27, 2022.