ISLAMABAD: The monetary policy has been tightening over the past two or three years in Pakistan to control inflation, which is projected to come down but more work needs to be done on demand and supply side.

This was stated by Jason Wu, Assistant Director, Monetary and Capital Markets Department, of International Monetary Fund (IMF) while addressing a press briefing.

Wu further stated that both the supply and demand side contribute to inflation. So in that sense, policy is needed on both sides: fiscal consolidation needs to be continued and on the supply side reforms of the energy sector, state owned enterprises are required. Many economies face similar challenges as well and the Fund staff continues to engage with Pakistan on this issue, Wu added.

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Tobias Adrian, Financial Counsellor and Director, Monetary and Capital Markets Department, IMF said that Pakistan is in a program; and there are really macro challenges, which include the financial sector and central bank policies but also broader macro and fiscal issues. The adjustments often take some time to take hold, Adrian added.

The Fund official further stated that some countries now have both upside and downside risks to inflation. Other countries have more upside. Others more downside risk. The key message that the Fund has to central banks is to make sure that inflation is heading durably back to target. Around the world, we do see communication by central banks that expect to cut rates, he said adding that some central banks have started to cut rates. Among advanced economies, Switzerland has started to cut rates and emerging markets started to cut much earlier. Brazil, Mexico are good examples here. “But the key is to make sure that we are durably back to inflation targets and not to sort of cut prematurely. That is really a key message,” Adrian added.

Copyright Business Recorder, 2024