High current account deficit is nothing to worry about: Baqir
The high current account deficit for June 2021 came as a surprise to the market and businessmen, however, people need not worry because the exchange rate is not affected, reserves are increasing. and the current account deficit is sustainable, said State Bank of Pakistan (SBP) Governor Reza Baqir.
Speaking at a session on “Securing Sustainable Growth and Promoting Digitization” on Wednesday, he said three factors spell the end for a country with a sky-high current account deficit, but Pakistan has witnessed none. of these characteristics.
Detailing the first parameter, he said that if the current account deficit is unsustainable, it could hamper a nation’s growth.
“A few years earlier, Pakistan recorded a current account deficit of 6% of GDP, however, in fiscal years 2021-22, it is expected to rise to 2-3% of GDP, which is sustainable,” he said. he declared.
In addition, the central bank governor added that a high current account deficit could reverse a country’s progress if it impacts the exchange rate or reduces foreign exchange reserves.
He added that Pakistan’s foreign exchange reserves have increased despite the current account deficit while the exchange rate is not discouraged, making the country safe.
He believed that no country could grow at a sustainable rate until its business community was put forward. Today, only countries are thriving that have empowered their private sector, he said.
“We have given incentives to exporters because a sustainable future for Pakistan can only be achieved if exports increase in a sustainable manner,” he said.
He noted that high foreign exchange reserves boost the morale of traders as they ensure payment for imports.
Baqir pointed out that in the distant future, a country would be unable to make progress if it did not embrace digitization.
Speaking of the initiatives taken to counter the impact of Covid-19 on the Pakistani economy, he said that when Covid-19 appeared in Pakistan in March 2020, the International Monetary Fund asked the central bank to introduce measures to save the country.
In this regard, the governor of the central bank said that the SBP had significantly reduced the benchmark interest rate and held three emergency meetings of the monetary policy committee.
“In addition, loan principal payments have been deferred and profit margin restructuring has been encouraged,” he said. “A Rozgar program has also been put in place for companies to allow them to pay the salaries of their employees in difficult times. “
The Temporary Economic Refinancing Facility (TERF) was introduced to encourage businessmen not to delay their business expansion plans due to financial problems resulting from the Covid-19 pandemic, he said. declared.
In total, the SBP has extended its support worth Rs 2 trillion during the Covid-19 outbreak.
SBP Deputy Governor Sima Kamil gave a presentation on the Raast digital payment system and said the ease of doing business in Pakistan cannot be accelerated without digitization.
“Raast is a world-class payments system and many advanced economies do not have such a mechanism,” she said. “It’s a secure, cost-effective system that offers real-time information. “
By October 2021, the person-to-person payment functionality will be added to Raast and through this mechanism, consumers will be able to send money to others by entering their mobile phone number.
Next year, QR codes and payment request facilities will also be introduced, she said.
Speaking of making clearing checks easier, she said image-based clearing will be launched under which a photo of the check can be used for clearing it.
She expressed strong hope that Raast would revolutionize payments in Pakistan.
She noted that digital banks are emerging all over the world and announced that SBP will soon launch digital banking licenses for the creation of fully digital banks. The capital requirement in such institutions will be low, she said.
Posted in The Express Tribune, August 12e, 2021.
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