KARACHI: State Bank of Pakistan (SBP) Governor Dr Reza Baqir is optimistic about the country’s economic growth prospects, expecting the economy to grow around 5% in the fiscal year 2021-22
“The economy grew about 4% in the last fiscal year, and we expect it to grow close to 5% in the current fiscal year; that is a welcome challenge for us,” the SBP chief said at the Pakistan Banking Awards 2021.
The assessment from the high-ranking government functionary came as the World Bank lowered Pakistan’s GDP growth projection to 3.4% in its latest report titled ‘Pakistan Development Update: Reviving Exports’.
Pakistan has envisaged a GDP growth rate target of 4.8% for the current fiscal year. Interestingly, the WB has again projected a GDP growth rate of 3.5% for the last fiscal year 2020-21 despite the government’s released provisional figure of 3.9%, arguing that there were increased uncertainties because of the COVID-19 pandemic.
While addressing the award ceremony, Governor Reza Baqir said the SBP is working with the government, banks, and other stakeholders to ensure a sustainable growth phase.
He said the SBP, in partnership with the government, is taking measures to support economic growth without compromising the sustainability of the external sector. He said that the government and the International Monetary Fund (IMF) would soon announce the agreement to resume the $6 billion loan programme.
“The Adviser to the Prime Minister on Finance has said clearly that we are very soon about to announce the agreement with the IMF for the next review,” Baqir said.
“The determination expressed by the Government of Pakistan that we see the journey ahead in partnership with the IMF… it is also the fact that we have confidence in the direction on our policies,” he said.
Recently, Saudi Arabia has announced a support package for Pakistan such as $3 billion deposits with the SBP and to provide a $1.2 billion deferred oil payment facility after Prime Minister Imran Khan visited the kingdom. “These (support from friendly countries) are the measures that over and above the IMF engagement are going to further support our external development,” he said.
The market-based exchange rate system has helped to ensure that the country’s external position remains sustainable. Since its inception, the flexible exchange rate has played its role as a shock absorber, Baqir explained.
He said the country’s economy has performed much better than predicted by the IMF last year. The SBP chief said that the country’s GDP growth, current account deficit, foreign exchange reserves, and external debt were in a much better position than the IMF projections.
“To back in June 2019 when the IMF started the programme with Pakistan, it projected our growth would be 3% in FY2021 instead the economy of Pakistan grew nearly 4% in the fiscal year that closed in June 2021, he said.
“For the current account deficit, the IMF projected we have a deficit of 1.7% of GDP, but we had a deficit of 0.6%. For workers’ remittances, the IMF projected a number of around $23 billion, but we closed the year with $29 billion in remittances.”