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KARACHI: State Bank of Pakistan (SBP) Governor Dr Reza Baqir Wednesday said the central bank is making efforts for a sustainable economic growth and last two years’ decisive policy actions have proved that the SBP’s policies have largely supported the economy.

While addressing an event titled “Ensuring Sustainable Growth and Promoting Digitization,” at SBP Head Office, Baqir said the SBP’s Covid-related measures have also provided support to the emerging economy of Pakistan.

He said that the State Bank’s policy measures taken after Covid-19 outbreak led to a significant strengthening of external and fiscal fundamentals. “Overall, the SBP provided a financial relief of some Rs 2.073 trillion to the trade and industry after the pandemic,” he added.

The State Bank is fully facilitating trade and industry to achieve a sustainable economic growth and during the last two years financing to the export sector has increased significantly.

On the industry demand, key policy rate is now in single digit. One year ago the policy rate was 13.5 percent and now it is 7 percent. Foreign exchange reserves also rose by $10 billion during the last two year. Reserves increased from $ 8.3 billion in August 2019 to $17.8 billion in July 2021.

The Governor SBP said disbursements under the Export Refinance Scheme have reached Rs 560 billion compared to Rs 280 billion two years back. Financing under the Long-Term Financing Facility (LTFF) for plants and machinery also surged to Rs 253 billion in 2021 against Rs 165 billion in 2019. Renewable energy scheme for the business was launched and financing under this scheme increased from Rs 3 billion to Rs 50 billion.

In addition, Temporary Economic Refinance Facility (TERF) was launched during the Covid for the expansion of the industry. While, under the Rozgar Scheme Rs 213 billion were disbursed to secure the jobs. The entire amount disbursed under these schemes was provided by the SBP to the banks to support the industry in a difficult time.

He said the SBP is also taking more steps to facilitate the industry and export sector in the light of their suggestions and recommendations. During the Covid, the IMF allowed for taking all-possible measures to support the economy.

With the SBP’s timely policy actions, Pakistan’s emerging market efficiently manages the exchange rate, which remained stable during the Covid pandemic compared to other countries, he added.

Governor SBP mentioned that market based real exchange is supportive for the economy, which helped to reduce the current account deficit. It is also a shock absorber that controlled the rising trade deficit, he added.

He said that interest rate is linked with inflation and SBP’s independent monetary policy committee determines the rate after reviewing the economic indicators.

On an external account, the Governor said that the current account deficit was high in June due to rising imports of machinery that showed expansion of the economy. In future, SBP expects a sustainable level current account deficit and as per estimates it will be 2-3 percent of GDP during this fiscal year. In addition, the exchange rate will respond to the market forces.

On the occasion Naser Hayat Maggo, President of Federation of Pakistan Chamber of Commerce and Industry, Deputy Governor SBP Sima Kamil and Arshad Mehmood Bhatti, Director Exchange Policy Department talked about the measures taken by the SBP for digitalization and foreign exchange.

Copyright Business Recorder, 2021

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