COVID-19 delays, not derails economic recovery process: Raza Baqir

ISLAMABAD: Governor State Bank of Pakistan (SBP) Dr. Raza Baqir on Wednesday said the coronavirus disease (COVID-19) developments had delayed but not derailed the recovery process of the country’s economy.

Addressing a webinar, the governor said Pakistan’s pre-COVID performance on economic front had helped containing the huge damage that could have been done otherwise.

“The pre-COVID improvements in fundamentals, the prudent policy response during COVID, and fully funded external and fiscal positions support resilience”, Raza Baqir added.

The webinar titled Pakistan Economy - Post COVID-19- Central Bank's Perspective was organized by the Institute of Chartered Accountant of Pakistan (ICAP), said a press release.

Raza Baqir said before COVID-19, the country’s external and fiscal fundamentals recorded significant improvement, Current Account Deficit went down unprecedently, foreign exchange reserves had increased, fiscal deficit was reducing, tax revenues were on upward trajectory while Pakistan’s stock exchange performance was extraordinary.

He said due to this performance, the COVID-19's impact on financial markets had been relatively contained in Pakistan compared to many other emerging markets.

“Proactive and prudent fiscal and monetary policy measures, in coordination with international financial institutions have also been helping to cushion the impact of COVID-19,” he remarked.

Recalling the worst economic situation in 2018, and early 2019, the governor said had the COVID-19 surfaced at that time, our economy would have been on its knees by now.

He said the government had to face criticism over taking difficult decisions to streamline the country’s economy but those decisions were bearing fruits now.

Raza Baqir said in order to minimized the impacts of lockdown in the country, the central bank took number of measures including Rozgar scheme, relief package for household and businesses, supporting health sector to combat the virus, relaxing credit requirements for exporters and importers, and facilitating new investment.

Dispelling the impression that only big industrialists and businessmen were taking benefit of it, the governor maintained that around 95 percent of beneficiaries of these schemes were small borrowers.

He said liquidity relief of over one trillion rupees had been provided so far by the SBP during COVID19.

Replying to a question, he said the subsidy announced by the SBP on loans was still significant despite reduction of interest rate.

However, he assured that the bank was also considering to further reduce the subsidy keeping in view the reduced interest rate.

To another question, he said, “We are still confident that in the months to come, the inflation will further decrease.

With respect to complaints by Small and Medium Sector (SME) that the commercial banks were not providing them the required loans, he said the SBP was focusing to bring about a stick and carrot policy for the banks to provide maximum loans to small businessmen.

He also assured to inject further liquidity to increase loans for the SME sector.

With regard to policy rate, the governor remarked that monitory policy committee would be ready to revise down the policy rate subject to further reduction of inflation rate.

Replying to another query, Raza Baqir said the exchange rate Pakistani rupee was stable as the country’s resources were sufficient.

“There is no need to worry if the exchange rate fluctuates,” he said adding “This is not unusual from our own experience as well as from the world experience”.

This was just like a commodity of which the price fluctuates on daily basis, he said.