ISLAMABAD: State Bank of Pakistan (SBP) Governor Dr Reza Baqir on Friday said Pakistan’s foreign exchange reserves would make a new record of $19.5 billion in a few days — beating the previous peak of about $18bn in October 2016.
“This will happen once the country receives $2.77 billion on August 23 from International Monetary Fund’s (IMF) general allocations of $650 billion that had been approved to boost global liquidity amid the coronavirus pandemic,” he said.
Appreciating the IMF’s step for providing global liquidity, the SBP governor said that this was happy news which would help improve the country’s forex reserves and have a very positive impact on various economic indicators.
He said the increase in reserves would help provide coverage to imports into the country, saying that since the country was currently in recovery mode, it needed more imports.
He said that the inclusion of $2.77 billion would also help enhance the net international reserves of the country, which is also a positive sign for the country’s economy.
To a question, the governor said that a higher growth during the past government was unsustainable because it suddenly went down and we had to go again to the International Monetary Fund (IMF) for a new programme.
However he said this time growth seemed to be sustainable and it would further rise in days to come.
Elaborating the reasons behind a sustainable growth, the governor said Pakistan’s exchange rate was now market based and that its forex reserves were also going up. Furthermore, he said the IMF also accepted that Pakistan had showed tremendous performance in increasing the net international reserves
Replying to another question, Baqir said after the outbreak of Covid, the average international debt to GDP was increased by around 10 per cent, however, Pakistan’s debt to GDP ratio remained in control and increased marginally.
He said the World Bank had openly admitted that Pakistan’s Ehsaas was the world’s largest programme.
He also appreciated the role played by the National Command and Operation Center (NCOC) in controlling Covid in Pakistan successfully.
Furthermore, the central bank governor said that Current Account Deficit (CAD) would likely remain at 2 to 3pc of GDP in the ongoing fiscal year (FY22) which is a moderate ratio.
He said the CAD would have been problematic if the exchange rate was not adjusting both ways, but since its fluctuation was market based, it was a good sign. Also, the CAD was not resulting in depletion of foreign exchange reserves as was happening two or two-and-a-half years ago. He said the CAD was in a sustainable level. “A moderate level of CAD is a good news for emerging markets.”
“Three years ago, alarm bells were ringing as the exchange rate was not making two-way adjustments and the country’s forex reserves were also at a very low level,” he said.
However, he said, now the situation was the other way around as the country’s forex reserves were going to be at historic highs coupled with a stable market based exchange rate that is making two way adjustments.
“About two years ago our economy was in recession mode but now it has come out of the stabilisation phase and entered the growth phase,” he claimed.
“Three months ago, you were saying GDP growth would be two per cent, but it came in at 4pc. The estimate this year is of 4-5pc growth.”
Baqir said Pakistan had achieved stabilisation and showed the international community that it had controlled two major challenges — current account deficit and fiscal deficit. “After stabilisation, the country shifted towards growth and proof is in front of you in the form of 4pc growth. All short-term indicators — auto sales, cement sales, electricity consumption and fast-moving consumer goods — are showing that we are firmly in the stage of growth,” he added.
“Our economy has completed the stabilisation phase successfully and now it has entered the growth phase which is evident with the fact that our economy is now growing at over 4pc rate,” he concluded.
State Bank of Pakistan (SBP) Governor Dr Reza Baqir on Friday said Pakistan’s foreign exchange reserves would make a new record of $19.5 billion in a few days — beating the previous peak of about $18bn in October 2016.