State Bank Governor Dr Shamshad Akhtar on Saturday hinted at tightening the monetary policy to further bring down inflation. Responding to a number of issues raised by the parliamentarians at a meeting of Senate Standing Committee on Finance, Revenue and Economic Affairs and Statistics in her maiden appearance.
She said that though the inflation had come down from 11 percent to 6 percent, it would be further brought down through strict monetary policy. The SBP Governor said the country needs huge foreign direct investment (FDI) to sustain the consumption-driven growth. "The biggest issue is how to attain 8.5 percent growth with the investment we had," she added.
Dr Shamshad said it was essential to improve governance and judicial system to attract FDI to bridge the financial gap mounting in the shape of trade deficit and current account deficit, which are $6.6 billion and $4.4 billion, respectively.
She described protracted litigation process as one of the major hindrances in FDI.
She said the central bank is not given full autonomy as weak legislation empowers the Ministry of Finance to take decisions on certain issues that are exclusively in the domain of the bank, and called for a delicate balance between the two for smooth functioning.
She said she was against devaluation to enhance exports because it would also increase production costs. Dr Shamshad said since taking over as Governor, the biggest pressure she had to face was for devaluing the currency. She said that the bank was closely monitoring the interest rates and banking spread and could adopt a policy of tightening monetary policy if the situation further worsened.
About the money the government had borrowed from the bank, she said it had returned Rs 145 billion, probably it received from privatisation.
The Senate Committee on Finance met here in the Parliament House under the chairmanship of Ahmed Ali. It was attended by Senators Muhammad Amin Dadabhoy, Haroon Khan, Nisar A Memon, Khurshid Ahmed, Safdar Abbasi, Muhammad Ishaq Dar, and Muhammad Anwar Bhinder. Advisor to Prime Minister, Salman Shah, Finance and Economic Affairs Advisor Dr Ishfaq Ahmed and a senior official of the State Bank of Pakistan also attended the meeting.