KARACHI: State Bank of Pakistan (SBP) Governor Dr Reza Baqir Monday said that decisive policy actions taken by the State Bank before COVID-19 outbreak led to a significant strengthening of external and fiscal fundamentals.
Speaking at the CFO Conference 2021 titled “CFO in the world 2.0-360o perspective,” organized by Institute of Chartered Accountants of Pakistan (ICAP), Baqir said that with the support of SBP’s timely measurers, as per revised estimates, the country’s is likely to achieve 4 percent GDP growth during this fiscal year and more than it in coming years.
Although, the challenges for the developing countries are unprecedented, causing economic, social and sustainable development concerns. However, he said that, Pakistan has successfully controlled its external imbalances during the Covid-19 as its economic fundamentals were strong. Pakistan is one of the only countries that undertook fiscal consolidation in 2020, despite Covid; and as a result, recorded one of the smallest increases in public debt.
“Pakistan also controlled its fiscal deficit that resulted in lower increase in public debt compared to other countries despite Covid-19. The increase was about 1-2 percent compared to advanced countries increase of about 10 percent,” he added.
The SBP reduced policy rate by 650 basis points and taken a number of fiscal measures to support the economy. The SBP focused the fiscal side in a proper manner by managing its expanding and SBP’s these policies were recognized internationally, he maintained.
However, Governor SBP asked for structural reform for long term economic growth. “Now, we will do structural reform to increase the investment and to get sustainable export growth,” he said.
The pandemic has pressed the reboot button of economies globally with long lasting impacts including lower investment, erosion of human capital to lower productivity, limited income growth and structural transformation in countries across the world, he added.
“Despite the Covid-19 we have been able to increase our gross and net reserves. We need to diversify our exports base as other nations have done,” he added.
He informed that during the Covid-19, SBP provided a targeted economic relief of some Rs 2 trillion to support the economic recovery through several measures. These included, interest rate cut by 650 basis points, principal deferment and loan restructuring, Rozgar payroll finance scheme to prevent layoffs, and concessional finance for investment in industry and health facilities.
Governor SBP said fiscal support during the Covid-19 was targeted to the most vulnerable, notably through the Ehsaas program. At the same time public debt and deficit were kept under check which has supported market sentiment, investment outlook, and economic recovery, he added.
He said that even before pandemic, Pakistan successfully controlled its current account deficit and now the current account is also in surplus and foreign exchange reserves are at a 4-year high level and this was because of a well-calibrated policy response.
On the occasion, he also congratulated ICAP for organizing CFO Conference 2021 and also appreciated ICAP contribution towards the economy.
Copyright Business Recorder, 2021