Pakistan’s Economy is Growing But Boom-Bust Cycles Must be Avoided: SBP Governor

Pakistan’s economy is on a growth trajectory after achieving stability, and will continue on this path towards growth, the Governor of the State Bank of Pakistan (SBP), Dr. Reza Baqir, said on Wednesday. He made these remarks while addressing a conference on ‘Sustainable Growth and Promoting Digitization’, and added that the transition period has been completed but the aim is to avoid the previous trend of the boom and bust cycles. ALSO READ Pakistan’s Digital Development Needs an Overhaul to Align With Global Development: Report Dr. Baqir said that neither a very high economic growth rate nor a very low one is acceptable, and that despite a negative real interest rate, the central bank has kept the policy rate unchanged at seven percent to allow the economy to grow. The representatives of the business community and the office-bearers of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) attended the conference. The SBP Governor said that there has been a lot of talk about June’s sudden hike in the current account deficit (CAD) but it is not something unexpected as the deficit always hikes around this time. “June usually sees higher payments [and] the imports have been rising since the economy is on the high growth path,” he said. However, he pointed out that the rising CAD does pose three challenges. Firstly, the exchange rate should react to the CAD, because if it does not, it is being artificially managed, which is a bad sign for the economy. ALSO READ SBP to Launch Mobile App to Incentivize Remittance Transactions Secondly, the size of the CAD matters, and Pakistan is expecting it to remain between two to three percent of the GDP in the current fiscal year, he said. The third concern that he mentioned regarding the increasing CAD was that if the foreign exchange reserves decrease as the CAD rises, it is cause for trouble. However, in Pakistan’s case, the foreign exchange reserves have been increasing, he said.