ISLAMABAD: State Bank of Pakistan Governor, Tariq Bajwa on Tuesday came forward on Tuesday three days after central banks decision for allowing to depreciate rupee against the dollar and said now exchange rate was now closer to the equilibrium.
The rupee has endured three consecutive days of depreciation since Friday falling cumulatively 4.86 percent or Rs5.13 and on Tuesday it shed a further 1.6pc on Tuesday, touching Rs110.64.
Rupee’s depreciation has been attributed to Pakistan’s worsening macro-economic indicators, widening current account and trade deficits and sliding foreign exchange reserves, reported an English daily.
Speaking at 33rd annual meeting of Pakistan Society of Development Economists (PSDE), Bajwa said current account deficit remain a serious threat and reason for allowing rupee to devalue was in response to this challenge.
This development comes as an IMF delegation is on a visit to Pakistan regarding post-monitoring talks on the lending programme which concluded in September 2016. According to finance ministry sources, IMF sought a 16 percent devaluation in the value of rupee and it should be around Rs120 to Rs122 against the dollar.
The government refused to accede to this demand and instead agreed to let the rupee depreciate by only 6 percent against the dollar.
Bajwa showed optimism in Pakistan’s economy and said foreign and local investors shared this outlook too.
Ex-Finance Secretary Dr Waqar Masood on Tuesday said, considering rupee’s devaluation, it would necessary to adjust inflation rate, external debt servicing cost and fiscal deficit, as three metrics will go up.
Bajwa admitted external sector challenges still exist, as imports are rising exponentially but he said good news was that import of machineries had gone up by 40 percent which indicated investment was coming into Pakistan.
SBP governor said private sector credit off-take had taken off in last few months and country was facing fiscal challenges but expected they will be controlled within this financial year.
Furthermore, Bajwa voice optimism and stated Pakistan’s economy was on track to achieve high and sustainable growth. He shared concerns over the way country’s banking sector was giving out loans.
He shared the central bank recognized three key areas, SME’s, agriculture sector and low-cost house financing for accelerating economic growth. Bajwa added right set of policies for agriculture sector could contribute to its immediate growth.
Although banks gave out over Rs700 billion in loans to agriculture sector, data revealed production loans remained low compared to last year, and agricultural sector credit disbursement policy would be scrutinized, said Bajwa.
SBP governor commented financial inclusion should be prioritized at all levels including all genders and regions. He said Balochistan’s contribution in total banking sector deposits was a meagre 2 percent and banks lend only extend loans of 0.2 percent to the province.