Pakistan’s economic fundamentals and overall performance remained stable during the COVID-19 pandemic, said Governor State Bank of Pakistan (SBP) Dr. Reza Baqir.
Addressing ‘The Future Summit’ in Karachi, Dr. Reza Baqir reflected on how Pakistan’s economy performed during COVID-19 and how the country’s economic fundamentals remained stable despite the restraints caused by the pandemic.
The Governor SBP governor stated, “Pakistan’s experience during the Covid-19 pandemic stands out globally, and I, as a Pakistani, feel proud about the country’s coronavirus journey.”
He explained that Pakistan was confronted with historic economic challenges and had to, on several occasions, approach the international lenders for funds because of fiscal deficit and current account deficit.
He remarked how Pakistan managed to reduce its debt-to-GDP ratio as compared to advanced economies where it climbed by 18 percent on average, while the debt-to-GDP ratio in emerging markets increased by 10 percent.
“Our GDP growth during Covid was negative 0.5 percent, as compared to other countries that saw GDP decline of negative 5-10 percent. The reason behind Pakistan’s low decline was the proactive response of the government,” said Baqir.
Regarding the ominous rise in Pakistan’s current account deficit, the Governor SBP cited the surge in prices of commodities in international markets. The surge in global commodity prices, according to him, should be recognized as both a global and domestic concern.
He further mentioned the country’s reserves, which served as an indicator to predict pressure on the balance of payment and exchange crises. He said, “in 2019, Pakistan’s gross reserves were about the same as its negative forward position, meaning that we stood at [a] net nil position. Currently, despite the COVID-19, we have increased our net foreign exchange buffers.”
The exchange rate and policy rate, according to Baqir, are tools we can utilize to keep the current account deficit at a sustainable level. He said the average exchange rate in 2021 remained unchanged from the previous year despite various fluctuations.
“The advantage of having a responsive exchange rate is that it acts as a natural shock absorber, and CAD remains at a sustainable level,” he said.
Source: Pro Pakistani