‘CAD chronicles’: SBP clarification

KARACHI: The following is the full text of a clarification by State Bank of Pakistan (SBP)

“In an article published in the Business Recorder on February 28, 2022 titled “CAD chronicles”, it has been alleged that a recent State Bank of Pakistan (SBP) tweet on the current account balance was “sugar-coated” and “misleading”, and that the SBP failed to “keep the sanctity of the institution and state the facts as they are.”

These statements are completely baseless. The tweet was based on facts and the SBP has always espoused the highest standards of integrity and transparency. We also pride ourselves in the recent improvements that we have made in our external communication, which have been appreciated both within and outside Pakistan.

“Here are the facts. The SBP tweet noted that the current account deficit in January of $2.6 billion would have been lower by around $1 billion if we exclude in-kind imports that are fully financed. These imports refer to oil, vaccines and other items that are financed by loans and supplier credit facilities. There is nothing “mysterious” about them, as the article suggests.

“Why is it important to present this additional information? Because not all current account deficits are created equal. When we assess the sustainability of the current account deficit, what matters most is the extent to which it can be financed.

Unlike the rest of the import bill, which needs to be funded by concurrent foreign currency inflows like remittances and exports, these imports do not generate any immediate demand for US dollars in the foreign exchange market. Payments for these imports are distributed over time, often over long durations.

“Whenever the State Bank releases important data, it aims to enhance public understanding of what they mean. It was with same objective that this tweet was drafted. Providing this information was in the public interest, as it shows that almost 40 percent of the current account deficit in January did not generate any immediate financing needs.

This helps make the current account deficit more sustainable. It is a vital point. Instead of sowing confusion and casting aspersions, the article should instead have helped to explain its significance in the public interest.”

Copyright Business Recorder, 2022