Dr Reza said that with recent reform program the country's economic conditions are moving in the right direction and SBP is confident that ongoing reforms will bring about more economic prosperity. "Pakistan's economic condition is many areas is now better than previous months and things will further improve in coming months. Our exchange rate is now stable, foreign exchange reserves are increasing and current account deficit is also on decline", he added.
Previously, Pakistan foreign exchange reserves were declined to $7 billion level as against immediate external payments of $8 billon. The chief reason of moving to a market-based exchange rate was that many emerging markets were using this but it was new for us," he mentioned.
People were worried of the free float exchange rate and there were several concerns among people, but the decision was taken in the larger interest of the economy, he said and added "since we've done the market based exchange rate our rupee is strengthening and it will also help build up depleting foreign exchange reserves".
He said the Monetary Policy Committee (MPC) of SBP keeps the interest rate high on higher inflation outlook as any surge in inflation will have pressure on exchange rate.
Governor SBP said that last increase in interest rate was announced in July 2019 and since then despite a surge in inflation the policy rate was not further increased because SBP knows that it was due to demand and supply issues. The positive results of higher policy are also evidence and inflation numbers of 12.4 percent for February 2020 are in line with expectations, he added.
A higher interest rate also helps increase deposits and now people are converting their foreign currency into Pak rupee as profit margin on saving accounts is attractive.
"People should look toward savers as well. National Saving Scheme is the source of income of a number of people and they are getting healthy profits supported by tight monetary policy. The issue is that we always look the one prospect and ignore the other one. In this case, we can say that savers are beneficiary as they are getting good profits on their savings," he said.
Governor SBP said that higher interest rate is not hurting the industry and export sector as they can get financing at concession rates. Exporters are being facilitated by providing loan at 3 percent to support the export sector. While, under the long term financing scheme financing is being provided at 5 to 6 percents and in the past monetary policy the scope of scheme was extended for all sectors.
Talking about 'hot money', he said that Pakistan has attracted some $3 billion investment in government securities and not only Pakistan but some other emerging markets are also attracting 'hot money'.
He mentioned that SBP is already closely monitoring the situation. Presently, 'hot money's' share in total debt stocks of treasury market is less than 5 percent, he said. Aziz Memon, President English Speaking Union, Majyed Aziz, Arif Habib and others were also presented.