ISLAMABAD: State Bank of Pakistan Governor Yaseen Anwar on Thursday said that revenue, balance of payment and credit to private sector are major challenges to the economy.

Speaking during a briefing to the Senate Standing Committee on state of the economy, the SBP governor, in response to parliamentarians' queries, identified increase in revenue, correction in balance of payment position and provision of credit to the private sector as major challenges being faced by the economy. He said the interest rate was reduced after taking into consideration various factors and not inflation alone. The non-availability of credit to the private sector was leading to decline in investment while comfortable position on external side provided cushion to the central bank for taking some risk to cut the discount rate and facilitate private sector in terms of credit. The external position, Yaseen said, is not as comfortable today as it used to be a few months ago. A fair and balanced view indicates grave risk to the economy as far as revenue, balance of payment and non-availability of credit to the private sector is concerned.

Yaseen said positive factors in the form of one billion dollars monthly remittance and currency swap agreements signed by the country with Turkey and China would provide some support to the external account, but overall there will be a situation of uncertainty in the second half of the current fiscal year. It would not be prudent to forecast future trend of monetary policy without analysing the figures.

The SBP Governor said there is no mystery behind increase in remittances and various measures taken by the regulator, action against two major moneychangers, remittances initiative and implementation of discipline in the market, have helped in bringing the informal sector into the formal sector. The regulator, he said was also working on formula to impose penalty on those market players who were found involved in manipulation of exchange rate and informed the committee that SBP was able to address the volatility of exchange rate in recent past by implementing some discipline in the market. Responding to a question about aspect of poverty reduction and unemployment in the SBP presentation on the state of the economy, Yaseen said Pakistan was on top of the list in terms of branchless banking and access to credit would help reduce poverty in the country. He said that corporate debt market would be developed in two years which would also be very helpful in generating employment opportunities and this could not be done in the past because of disconnect in cooperation between the SBP and Security Exchange Commission of Pakistan (SECP). The relations and cooperation between the SBP and SECP are very good which would help develop corporate debt market.