Era of stabilisation in economy is over: Now focus on increasing employment, growth, says SBP chief

KARACHI: Governor State Bank of Pakistan Dr Raza Baqir has said the era of stabilisation in the economy is over and now the focus is on increasing employment and growth. "The country's economy is moving in the right direction. We do not see an increase in interest rates in the near future," he said, adding if we have to raise the interest rates, we will do it slowly, not quickly.

Talking to Shehzad Iqbal on the Geo News programme Naya Pakistan, Raza Baqir said if this government had not incurred a current account deficit of $19 billion, it would not have to take difficult decisions.

In response to a question, he said COVID-19 has caused a huge damage to the economy, adding attempts are being made to recover from the loss but we have not been able to do so yet. He said this is not the first time that the interest rate has gone up to more than 13 per cent; even before this government, the interest rate had gone up to more than 13 per cent. We raised the policy rate to 13pc but we reduced it seven months later, he said, adding no other country in the world has lowered its policy rate as fast as Pakistan did.

Explaining the reason for an increase in the interest rates, he said that the rise in interest rates was due to the fact that the economy was facing various challenges, including current account deficit.

In response to a question, he said that the era of stabilising the economy has passed and now our focus is on growth and job creation. Referring to the autonomy of the SBP, he said that this was not the first time that steps were being taken for the autonomy of the SBP. But no ordinance has been issued in this regard, he said and added so far only one bill has come, which will be debated in parliament.

He said that the steps being taken by this government would lead to sustainable development in the future, not artificial ones. Giving seven percent mark-up on Roshan Pakistan Digital Account Scheme, Raza Baqir said when you start a new job, you offer it better to get people's attention, and that is why about eight hundred million dollars have come under this scheme.

Raza Baqir said: "It is a success for Pakistan that we have issued $2.5 billion in Eurobonds and it is proof that we are moving in the right direction." In response to a question, he said if the government wants to form a committee for coordination, it is a good thing. "We want the monetary policy and fiscal policy to go hand-in-hand."

Raza Baqir added there is continuity in the SBP policies and that is why the value of rupee has improved. The outlook of our monetary policy is that we have to support the economy, he added.

Dr Baqir stated Pakistan’s economy was in tatters at the time the country was forced to approach the IMF back in June-July 2019. “Foreign exchange reserves at that time were $7 billion and today the figure is $13 billion. “We managed to bump up our [foreign exchange] reserves despite the [coronavirus] shockwave that hit the world and we were able to do so due to our policies.” Many people are worried as to why Pakistan had to go to the IMF for help, he said, adding “countries only go to the IMF when there’s no other option.” Pakistan had to reduce the “$19-billion trade deficit that we inherited” and that the figure has now turned into a surplus worth $800 million. Baqir said Pakistan’s economic performance over the past couple of years should give confidence to the people as the country heads back to the IMF. “We’ve always tried to ensure that policies in the nation’s favour are implemented and we will continue to do so,” he added.