Steps taken to transform economic deficit into surplus: SBP governor

Economic sentiments have become positive and with mobilization of national resources more relief will be provided to the private sector so that it could catalyze national economy, said governor State Bank of Pakistan (SBP) Dr Reza Baqir.

Addressing the business community of Faisalabad at Faisalabad Chamber of Commerce & Industry (FCCI), here on Thursday, he enumerated various steps taken to transform the economic deficit into surplus and said that during 1st six months of current fiscal exchange rate has been switched over from fixed to the market driven regime. He said that imports have been reduced while exports have recorded a modest increase and the SBP is optimistic that with the confidence of private sector more facilities would be doled out to this sector.

He compared Pakistan with Egypt and said that in Egypt exchange rate was increased 125 percent within only 24 hours but in Pakistan only 55 percent increase was recorded during 18 months. About interest rate, he said that in case of Egypt it had jumped to 18-19 percent while in Pakistan interest rate is still 13.25 percent. About inflation, he said that it is 30-35 percent in case of Egypt while it is only 12 percent despite of blatant criticism by some elements in Pakistan. Dr Reza said that all macro level indicators are positive and now his focus is on controlling inflation. He was optimistic that within next few months, inflation will start decreasing.

Comparing savings with inflation rate, he said that people prefer to invest this savings in real estate. However, he is making efforts to bring these investments through banking channels. He disclosed that 20-30 percent more revenue has been collected and as the situation will ease down more facilities will be announced for the exporters.

Dr Reza said, "There are only a few countries including Sudan, Ethiopia, Yemen and Afghanistan whose export to GDP ratio is less than 10 percent. He said that our export has huge potential and we could double it as compared to our GDP".

He also mentioned various schemes for export sector, including Long-Term Finance (LTF) which is offering only 3 percent interest rate for the exporters. He said the SBP intends to diversify exports which henceforth remained textile centric. He said, "We are also working on financial inclusion and in this connection the SBP will encourage savings so that savers could get better interest rates for their savings". As economic situation will improve, the ban on imports will be gradually lifted, he assured.

He also announced more facilities for export sector in a phased manner as he doesn't want to disturb people's confidence. He further said that Banking Services Corporation has framed different focus groups including micro and agriculture. "It has arranged many sittings with FCCI", he said and added that more awareness could also be arranged for the different sectors of the economy. He also mentioned various schemes for women entrepreneurs and said the SBP will provide capital at zero percent interest to commercial banks who are allowed to receive only 5 percent mark-up for a period of 10 years. He further said that in this case,the SBP will also bear 60 percent risk of loaning.

Earlier, the forms for loan applications were consistent of 7-8 pages which have now been reduced to only 1 and half page. "In this case, documentation is also being standardized which is expected to be introduced in February next year", he added.

In reply to question, Dr Baqir said that LTF has Rs 25 billion cushion. Similarly for EFF schemes, cushion of 25 billion is also available up till December 31. However, the SBP will further increase the limit for the remaining fiscal year. He also pointed out that knowledge management system would be launched during next month. "It will be an online facility and applicants could know the status of their loan applications by entering their transaction code", he added.

Earlier, Rana Sikandar-e-Azam President FCCI in his address of welcome introduced Faisalabad and FCCI. He mentioned the financial achievements of this government during last 5 months and said that rupee has appreciated against dollar. Similarly, our imports were reduced to 19.2 billion dollars while exports remained at 9.9 billion dollars. "If we include remittances of 9 billion dollars during this period, our deficit will remain only 0.6 percent", he added.

Rana Sikandar-e-Azam criticized the increase in interest rate and said that for industrialization cheap loan is imperative and SBP must take solid measures to provide cheap loans to industrial sector. He also criticized 12 percent inflation rate and said that as the economic situation has improved government must control the inflation so that common men could heave a sigh of relief.

Later, lengthy question-answer session was also held in which governor SBP and his team members responded to the questions raised by Mian Muhammad Idrees, Zafar Iqbal Sarwar, Mian Muhammad Lateef, Azhar Majeed Sheikh, Rizwan Ashraf, Hajji Talib Hussain, Kashif Zia and Chaudhary Salamat.

Vice President FCCI Bilal Waheed Sheikh offered vote of thanks while Mian Javed Iqbal former President FCCI along with Rana Sikandar-e-Azam presented FCCI shield to Governor SBP Dr Reza Baqir.