SBP governor speaks to media persons: $2.77bn from IMF to help facilitate increased imports

ISLAMABAD: The Governor State Bank of Pakistan Dr Reza Baqir on Friday said that after receiving US$ 2.77 billion from the International Monetary Fund (IMF) Pakistan’s foreign exchange reserves would reach a historically high level. He also stated that considerable growth is expected in the coming months.

Speaking to media persons at SBP Office Islamabad, he said that last time highest foreign exchange reserves were of $19.5 billion in October 2016 and SBP’s reserves would reach around $20 billion after 23rd August, a date when the countries would get money from the IMF.

The Governor welcomed the assistance provided by the IMF and stated that it would have a positive impact on balance of payments (BoP), current account and foreign exchange reserves. He said there is timing mismatch in imports and exports and on the back of increased imports, exports would pick up in coming months. He said that current account deficit and budget deficit are manageable. He said any adjustment in the policy rate would be made only after taking into account inflation trends.

He further stated that money being provided by the IMF would help boost reserves, and cover imports as economic activity is picking up in the country and imports are increasing.

Downplaying the concerns about increase in the current account deficit, Dr Baqir said the central bank’s projection of current account deficit is 2-3 percent, which would be around 9 billion in dollar terms.

He said SBP fully supports the Kamyab Pakistan programme because it would increase financial inclusion.

Pakistan's net international reserves set to increase: SBP governor

APP adds: Referring to apprehensions raised by some of the economists about rising trend of Current Account Deficit, the Governor SBP said the deficit would likely to remain at 2-3% of GDP during current year which is a moderate ratio.

Moderate increase is a good sign for economy provided that it should remain sustainable, he said, adding “We were in deep scramble in 2017-18 when our CAD went up to $19 billion or 6% of GDP”.

The Governor said there were three signs when the economy could be in trouble due to rising current account deficit. First alarming bell, he said was that amid growing CAD, fluctuations in the exchange rate were high and non-adjustable.

Similarly, he said, when the foreign exchange reserves were at the lowest levels then the growing current account deficit could hurt the economy.

He said about three years ago all the three alarming bells were ringing as the exchange rate was not making two-way adjustments and the country’s forex reserves were also at very low level.

However, he said now the situation was other way round as the country’s forex reserves were going to be at historic highs coupled with a stable market-based exchange rate that is making two-way adjustments.

He said about two years ago our economy was in a recession mode but now it had come out of the stabilization phase and entered the growth phase.

Similarly, about three months ago, Pakistan’s GDP growth rate was being foreseen at 2% but now it had been proved that it had grown by 4% in the previous year while in the current year, according to the SBP estimation, it would grow by 4-5%.

“Our economy has completed the stabilization phase successfully and now it has entered the growth phase which is evident with the fact that our economy is now growing at over 4% rate,” he said, adding that the country’s economy had witnessed a complete turnaround.

To a question, the governor said that a higher growth during the past government was unsustainable because it suddenly went down and we had to go again to the International Monetary Fund (IMF) for a new programme.

However he said this time growth seemed to be sustainable and it would further rise in days to come.

Elaborating the reasons behind a sustainable growth, the governor said Pakistan’s exchange rate was now a market-based and that its forex reserves were also going up. Furthermore, he said the IMF also accepted that Pakistan had shown tremendous performance in increasing the net international reserves

Pakistan set to receive $2.77 billion from IMF on Aug 23, says Tarin

Replying to another question, Dr Baqir said after the outbreak of COVID, the average international debt to GDP was increased by around 10%, however Pakistan’s debt to GDP ratio remained in control; it increased only marginally.

He said the World Bank has openly admitted that Pakistan’s Ehsaas is the world’s largest programme.

He also appreciated the role played by the National Command and Operation Center (NCOC) in controlling COVID in Pakistan successfully.

The Governor SBP said that sustainable economic development was the top priority of the government and all the economic indicators and the government economic policies are moving in the right direction.

He expressed his hope that the current economic growth and development would be sustainable in future as well “because we have moved towards economic stability for better economic growth.”

He said that Pakistan’s net reserves are increasing which was a good economic trend and Pakistan has appeared as emerging market with a growing reputation in the international market. He said that during fiscal year 2020-21, Pakistan’s remittance increased by 25 percent for the first time in our economic history.

He said that the country’s exports of all potential sectors are increasing day by day.

He said that economic team is analysing all the economic indicators on a monthly basis.

Copyright Business Recorder, 2021