Summary Mr Raza mentioned that adjustment in currency rates has helped out the increase in state's exports.
KARACHI (Dunya News) – State Bank of Pakistan (SBP) Governor Raza Baqar on Monday gave a speech at the Institute of Business Administration (IBA) on the twin deficits – fiscal and current account – the very challenging job for Pakistan, which has been the primary focus of the federal government under its macro-economic stability agenda.
Mr Baqir observed the twin deficit as the current and the major trade problem for the state’s economy and that it widened from the year 2014 to 2017.
Alarmingly, he witnessed that the current account deficit (CAD) rose to $2 billion per month – the highest recorded in the country’s history.
However, with the central bank taking measures to check inflation rate, the current account deficit has now been halved in the first two months of the new fiscal year as compared to the corresponding period last year.
The CAD – for the two month period – reduced by $1.56bn to $1.29 billion from $2.85bn during the same period last year.
This was in line with the downward trend witnessed throughout 2018-19 when the deficit stood lower by 31pc to $13.58bn, from $19.8bn in FY18 – recording a decrease of $6.3bn. The major reason of the shrink is the decline in the trade deficit.
In total, the trade deficit for the two months of the current fiscal year stood at $3.815bn as compared to $6.118bn during the corresponding period last fiscal year.
Mr Baqir mentioned that only the interest rate could curb rising inflation rate, and in future, the decision on interest rate would be taken in accordance with the inflation rate in the state.
He further stated that the savings rate in Pakistan was lowest as compared to the peers and the savings rate should be increased.
The governor noted that the exchange rate policy was reviewed in May 2019 and since then the country has been witnessing inflows instead of earlier ‘outflows.’
He pointed out that the difference between interbank and open market in terms of currency rates and the local currency’s strength against the US dollar was reducing.
Mr Raza mentioned that the adjustment in currency rates has helped out the increase in state’s exports.
