State Bank of Pakistan Governor Reza Baqir has said that “the tough part” regarding fluctuations in the exchange rate and inflation adjustments has already gone.
“We take difficult and non-popular decisions, our strategy was to give bad news as early as possible since bad news in instalments makes it hard for the people to get optimistic about the future,” he said while interacting with members of the American Business Forum.
The SBP governor said Pakistan has the lowest savings rate in the region. “The real return on savings accounts currently is zero; anyone who has a savings account is getting 11-12pc return whereas inflation right now is 12pc.”
He said that the savings rate is important for Pakistan because it is a big reason why the country has a balance of payments problem.
“If we have to finance a higher rate of investment, then we either have to borrow from abroad or domestic pool of savings. This is the reason why we habitually have balance of payments problems because our savings are not enough to meet our investments,” Baqir said. “How can one expect people to save when they are getting zero return in actual, this has triggered informal means of savings by people like in the real estate sector, which we now want to bring under the banking network.”
He said that for the last couple of years, the central bank has been preoccupied with much bigger problems like tackling falling level of foreign currency reserves and trying to deal with external position, which used to be difficult to manage.