KARACHI: The governor State Bank of Pakistan (SBP), Dr Reza Baqir, has said that revised growth forecast of 4 percent demonstrated that central bank’s policy based on prudent fiscal and aggressive stimulus has been successful.

In an interview with international media on Tuesday he noted that central bank earlier predicted 3 to 4 percent growth, after seeing the recent data particularly on agriculture output SBP's revised forecast for fiscal year 2020-21 is also 3.9 percent.

SBP governor said, it comes upon a combination of two factors; one is the central bank’s aggressive stimulus equalling to 5 percent of GDP and the second one is prudent re-calibration of government spending on the part of fiscal authorities injection in cash programme. It curbed the fiscal deficit and supported market sentiments, he noted.

Investors saw growth in Pakistan unlike other developing economies while calibrated risks by a combination of prudent fiscal and aggressive monetary measures were one of the key factors that underpins the economic turnaround increase in growth to about 4 percent.

On a query regarding inflation outlook for the country, he said that SBP announced a forecast for inflation several months ago between 7 to 9 percent on average for FY 20-21. Recent estimates see it close to the top end while the most recent print is around 11 percent. In response to a question about the IMF programme he said the programme right now is in a stage of pivoting to growth. In recent IMF programmes Pakistan has successfully demonstrated that it has stabilized the current account which at the end of previous fiscal year was in deficit of $19 billion. The deficit was converted in the first three quarters of FY 2020-21 into a surplus of $900 million.

He said that foreign exchange reserves of Pakistan were 7.2 billion when the IMF programme was started and now reserves held by the central bank were in the range of 16 billion exhibiting an increase of more than double than starting amount.

Increase in net international reserves drawn not by borrowing but by high quality measures, the governor boasted and added that “Now pivoting to growth is critical for any national economic programme because you have to show that gains of stabilization are going to reach people in the form of growth.”

IMF in its World Economic Outlook acknowledged that the ratio of public debt to GDP remained broadly unchanged in Pakistan while in emerging markets the rate grew at 10 percent of GDP.

On a question on the decision of keeping policy rate unchanged, SBP governor informed that the Monetary Policy Committee maintained policy rate at 7 percent while considering COVID related uncertainties, factors affecting the rate of inflation recently in the shape of food and energy prices and forward guidance.

Reza Baqir said that MPC also decided to maintain current accommodative stance as well but the committee may decide to moderate the extent of accommodative in a gradual and measured manner if signs of demand side pressure emerge.

“In the current disease related uncertainties ravaging emerging markets it is more dangerous to withdraw stimulus too soon rather than too late,” he opined.

‘Ehsas’, Pakistan’s cash transfer programme is recognized as one of the global successes. The World Bank noted it amongst the top four cash programmes in terms of the number of people reached and among the top three global programmes in terms of shift of population reach.

This programme was one of the elements of the government’s strategy to deal with Covid-19, he said adding that in 3 successive waves the government, through administrative measures, has been able to bring down the number of new cases as the rate of new cases is 12 in a million, which is very low compared to other emerging economies. The second element was Ehsas cash support programme and the final one is extensive monetary stimulus that was given by the central bank coming to around 5 percent of GDP, besides the prudent fiscal policy, he maintained.


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