KARACHI: The State Bank of Pakistan Governor Dr. Reza Baqir said that the economic conditions are better in many areas as compared to the past. The country’s economy was not in strong position back then as the reserves and exchange rates were falling.
Addressing as a chief guest at an event of English Speaking Union held at a local hotel, he said that the economic conditions are better because of the difficult reforms undertaken, orderly exchange market and improvement of exchange rate markets are the proof.
Reza Baqir said SBP is working on to reduction on reliance of currency. The central bank has a big agenda on digital payments and its goal is to increase manifolds the reliance on digital payments.
He said two schemes would be soon coming out, namely ‘Asaan Mobile Account’ and ‘Payment Gateway’. Monetary policy committee had to increase the interest rates to control the rising inflation but the last rate hike was made in July.
Comparing the current economic situation with the previous year, he informed that the country’s reserves were down to 7 billion dollars on balance sheet in addition to that short-term debt of 8 billion dollars. “We were not in the strongest position as far as our reserves are concerned”, he said.
SBP Governor said when the bank decided to reform the exchange rate system by making it a market based system.
He mentioned that since the transition to market based system, the exchange rate market has been orderly in fact the value of rupee has strengthened.
Highlighting the importance of foreign exchange reserves he said they are the single most important determinant of a country’s economic sovereignty. The reserves have grown to 12 billion dollars on balance sheet. This is just the auspicious beginning of the reforms program and there is a lot more to do, he said.
Dr. Reza Baqir said the monetary policy committee of the central bank had to increase the interest rates because the inflation was rising. At the same time, the committee was confident that the inflation would come down.
The part of reasons of the increasing inflation was also the pressure on rupee, the depreciation of the rupee that had occurred over the preceding months had caused the prices to rise. The last rate increase was done in July when the inflation was around 8 to 9 percent.
Since then the inflation rose, now it is at about 12. Despite the fact that the inflation was rising, the SBP monetary policy committee did not increase the interest rates between July and now.
“We are confident that the combination of policies between the interest rates and exchange rate is going to deliver declining the inflation and also it is going to keep the exchange market orderly”.
He said “for the first time after many years we are seeing in the deposits data that we get from the banks that people are converting their foreign currency deposits into Pakistani rupees”.