Access to international financial markets has become difficult for emerging economies like Pakistan (Photo File).
Karachi: State Bank Governor Jameel Ahmed has said that Pakistan’s economy is facing pressure from high inflation and external balance of payments.
Governor Bank Daulat Pakistan Jameel Ahmad met key international investors and fund managers at an event organized by Barclays on ‘Pakistan’s Economic Challenges and Future Action Plan’ on 13 April 2023 in Washington DC.
Governor State Bank briefed the participants about the issues facing Pakistan, its policy responses and the country’s future plans to address these issues. Governor State Bank also answered the questions of the participants.
The governor explained that Pakistan’s economy is facing high inflation and external balance of payments pressures, largely driven by adverse global shocks and domestic developments.
Jameel Ahmed said that although commodity prices in the global markets have come down from their mid-2022 highs, they are still significantly higher than pre-Covid levels and are affecting domestic inflation and the external account. are At the same time, global financial conditions are tight, which has made it difficult for emerging economies like Pakistan to access international financial markets.
He said that the country’s debt repayment is front-loaded, while the inflow of funds is gradual. Program loans from other multilateral agencies await completion of IMF review. In this interim period, the country is continuously receiving new financing while also rolling over existing loans from bilateral partners.
The governor said that the State Bank has increased the policy rate by 1400 basis points to 21% in the last 18 months. Other measures to reduce inflation and demand pressure on the current account include regulatory tightening. Moreover, the exchange rate has depreciated in the past few months, which became the first line of defense against emerging external imbalances.
He said that from the financial point of view, the government is committed to the policy of fiscal contraction. The country is moving towards achieving economic stability as the effects of the policy measures on the economy are beginning to show. The current account deficit has narrowed and foreign exchange reserves, though at low levels, are growing. Although inflation is currently high, it is expected to moderate over the next few months. Also, the restoration of the IMF program will also remove the uncertainty related to foreign ownership.
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