KARACHI: Policies in Pakistan’s favour would be implemented despite aid from the International Monetary Fund (IMF), State Bank of Pakistan (SBP) Governor Dr Reza Baqir said.
Speaking in a private channel programme “Naya Pakistan”, Dr Baqir said Pakistan’s economy has been faring better during the third coronavirus wave than the first two.
“There’s growth in various sectors, including cement and car sales, as well as fast-moving consumer products (FMCGs),” he said. “All of these have a 20-30% growth momentum.
“Therefore, the SBP in its monetary policy revised [Pakistan’s] growth forecast to 3% and the expectation for the next fiscal year will be much more than this,” he added, noting that people should have the sense and hope that if the country passed the first test successfully, it would do so again as well.
Talk show host Shahzad Iqbal mentioned that there were concerns and fears in some quarters that returning to the IMF programme could lead to rising inflation and that the third coronavirus wave could hurt economic activity.
Dr Baqir responded by saying 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] shock wave 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 that during his experience working there for close to two decades, he observed that no country approached the global financial institution happily.
“Countries only go to the IMF when there’s no other option,” the SBP official said, adding that 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.
In response to Iqbal’s question as to why Pakistan failed to better negotiate with the IMF — the current conditions of which stipulated bolstering the power tariffs, doing away with Rs140 billion worth of tax exemptions, and possibly new taxes worth Rs700-800 billion next year that would likely choke demand in the economy, the SBP governor said there were “good negotiations already” and more would be done in the future as well.
“We will take whatever concession is possible; for example, there were fears of an increase in the interest rate when market learned that Pakistan may have to go back to the IMF. However, we gave a forward guidance during the Monetary Policy Committee (MPC) meeting two months ago.
“But we asserted that we are seeing the monetary policy settings will remain the same in the near future. Our economy has a lot of support from the current monetary policy.
“In one of our COVID-19 measures, the Temporary Economic Refinancing Facility (TERF), there has been an investment of Rs400-450 billion and that’s bringing momentum to the economy. There’s never been such a measure in Pakistan’s history before.
“In addition, during the coronavirus pandemic, loan markup and payments of Rs900 billion were deferred. Cheap loans worth Rs250 billion were given by the SBP to those companies that maintained jobs, which was a condition.
“We gave so much stimulus so that the economy may get out of this COVID-19 pandemic successfully. There’s a lot of momentum on the demand side.
“In negotiations with the IMF in the future, our primary focus would be to safeguard employment and this is how we will continue negotiating in the future.
