KARACHI: Governor State Bank Reza Baqir Friday said it has been decided to maintain interest rate during the Monitory Policy Committee meeting, adding that the SBP is to issue forward guidance.
In Geo’s programme ‘Aaj Shahzeb Khanzada Kay Sath’, the SBP governor said the forward guidance was issued to increase the trust of businessmen and investors. He said the Monitory Policy Committee thought to issue the forward guidance as we have been feeling confidence of our economy. He said some have reservations as after entering IMF programme, previous steps might be repeated but through issuing the ‘forward guidance’, we indeed conveying a message that monitory decisions would not be taken like the past. He said some decisions would have been taken to improve current account and physical deficits.
Reza Baqir said the current situation seemed better than before and the monitory committee has conceived that the interest rate would be maintained in near future, saying any adjustment in interest rate would be gradual. He said the IMF has focused on physical policy, power sector reform, SBP monitory policy, and foreign reserves. He said we have improved on physical side and established primary surplus before the corona, adding that we could carry forward IMF reforms well now. He mentioned that the current account deficit was not levelled through interim measures but organisational reforms.
The SBP governor stated that the dollar has gradually been getting strengthened and we have moved a step ahead with confidence and that is the reason we have mentioned dollar in the monitory policy. He said the second paragraph of the policy should be read carefully. He said if we put the dollars in the market, the foreign reserves would be decreased, saying when the exchange rate was floated, the reserves were $7.2 billion but currently we have $13 billion in our reserve pool and despite the pandemic, we could successfully increase $6 billion reserves.
Baqir said we did not increase our reserves through foreign loans as the betterment in gross reserves also reflected in net reserves. He said the investment had come through the temporary economic refinance facility (TERF) was to purchase local machinery and machinery import. He said the SBP has been in coordination with other commercial banks to import machineries in distributed manner to lesser the burden on foreign reserves. He said if the current account deficit would, somehow, be increased a little even then it would not create past situation.
The State Bank of Pakistan governor assured people that a little current account surplus or deficit could not bother much as the country’s economy gradually getting better. He said it was good to increase import of machineries and capital goods relating LMS, cement, and automobile sector. He further said earlier the import of consumption goods had been increased but now the increase in import was for machineries and capital goods and that was good for the economy. He said due to the coronavirus, the people had adopted official way of remittance rather using ‘Hundi’, hoping the trend would continue even after the pandemic.
Reza Baqir said everyone has been excited for ‘Roshan Digital Account’, and it would be the first time that the overseas Pakistanis have been getting digitally onboard as 76,000 Roshan Digital Accounts have already been opened and $362 million has been transferred through those accounts. He said it made possible for the overseas Pakistanis to invest through one click, and through effective programme, local payments could also be digitalised. He said the purpose of digitalisation was to make things formal and every payment should be done through official channels, while to increase receipts and remittance.
The governor said the government has not been borrowing from the SBP and to increase the revenue, the government had taken plausible measures. He said it is sheer injustice that some had to pay taxes while others, who have been earning but not paying taxes, saying as far as the primary balance has been souring, the increase of debt is not bothering. He said the total deficit was due to the payments of interest on past loans, adding that our banks have desperately been trying to issue loan to the government and that is the reason, the role over of the debt in banking side is not an issue.
He said if the primary balance would increase that the private banks would search people to issue loan in private sector. He said the interest rate was decided by the monitory policy committee and it would happen in future too.