- The country’s central bank head in the State Bank of Pakistan Annual Report FY20 was of the view that despite numerous challenges during FY20, Pakistan’s economy performed relatively better, particularly on the external and fiscal fronts.
Governor State Bank of Pakistan (SBP) Dr. Reza Baqir has stated that the measures taken by the central bank amid COVID-19 provided a stimulus of around Rs.1.6 trillion or 3.9 percent of GDP to the country’s economy.
The country’s central bank head in the State Bank of Pakistan Annual Report FY20 was of the view that despite numerous challenges during FY20, Pakistan’s economy performed relatively better, particularly on the external and fiscal fronts.
“During the first half of the year, the policy focus remained at stabilizing the economy and building adequate buffers. The country also witnessed a smooth transition to a market-determined flexible exchange rate regime and a prohibition of government borrowing from SBP. The second half witnessed proactive and timely policy measures to counter the emerging risks due to COVID-19 pandemic,” wrote Baqir.
The SBP chief said that the successful implementation of deep-rooted fiscal and monetary structural reforms in the first half of the fiscal year facilitated rolling out of unprecedented policy support measures to combat the COVID-19 shock.
“SBP adopted a proactive approach in assessing the evolving COVID-19 related situation around the globe and within the country, enabling it to identify the issues in a timely manner and implement policy prescription necessary for ensuring the continuous provision of financial services while limiting the impact of the pandemic,” he said.
Apart from lowering the borrowing cost through aggressive monetary easing, SBP introduced targeted schemes i.e. the Rozgar Scheme to support employment, health sector, and investments in new/existing projects to stimulate the economy and also enhanced the scope and coverage of the existing concessional refinance schemes.
Baqir stated that the State Bank complemented these initiatives with a broad range of macroprudential measures to facilitate the financial sector in supporting the real sector of the economy, preserve the solvency of the borrowers and enhance the loss absorption capacity of banks.
“The host measures include a reduction in Capital Conservation Buffer, launching of a comprehensive package to facilitate the borrowers in restructuring or deferment of principal amount of their loans, decrease in the debt burden ratio for consumer finance and relaxation of margin requirement for exposure against shares of listed companies. The policy initiatives and support measures are estimated to have provided a stimulus of around Rs.1.6 trillion or 3.9 percent of GDP,” he stated.