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KARACHI: Pakistan State Bank (SBP) Governor Reza Baqir said the central bank was ready to tackle the “mother of all external shocks” as the country is going through a financial crisis due to the coronavirus pandemic .
In an interview with Bloomberg, Baqir said: “The political response during [COVID-19] has been cautious, “referring to three consecutive rate cuts that lowered the interest rate to 9% – single digits, as advised and required by the local business community.
However, Pakistan’s central bank was “absolutely ready to take further action if necessary,” he added.
So far, the SBP has introduced a series of measures to deal with the crisis that has negatively affected the country’s economy, leaving many in limbo as Prime Minister Imran Khan continues to respond by easing blockades to prevent hunger and poverty due to closed businesses and provincial leadership. lean towards continuing imposed restrictions as the number of cases increases exponentially.
Interestingly, the economy is also forecast to contract – 1.5% – for the first time in 68 years. The central bank, on the other hand, has tried to mitigate the bumps caused by the new virus by suspending loan payments for a year in some cases and allowing more loans at half the policy rate to buffer companies and prevent layoffs. massive.
Baqir, in this regard, said: “The great global blockade has been the mother of all external shocks,” especially for emerging markets, such as Pakistan. The problems, he added, were exacerbated because such economies have high debt and “limited political space to undertake expansionary policies.”
The SBP’s steps to help companies helped cushion the rupee’s decline, which over the past week ended up gaining more than 4% to reach Rs160.33 per dollar.
Prime Minister Imran last month announced a 1.2 trillion rupee stimulus and relief package to avoid the negative impact of the COVID-19 pandemic, while his Ehsaas program, under Dr. SAPM Dr. Sania Nishtar, is expected to benefit some 67 million people across Pakistan.
The prime minister has also managed to secure another $ 1.4 billion in loans from the International Monetary Fund (IMF), which has already loaned the developing economy $ 6 billion under an Extended Fund Agreement (EFF).
According to the IMF, which believes that Pakistan has made some progress, after all, any growth lost in the coronavirus pandemic would be temporary and the country would continue on its way to cut public debt. Earlier this week, the global lender said inflation and the debt-to-GDP ratio were expected to drop to 4.8% and 73%, respectively, in 2025, despite the latter expanding this year due to the crisis in the virus.
The pandemic has affected more than 10,000 people and has killed more than 200 since the first case was reported in February this year.
A shutdown was imposed to curb the spread of the virus, although Prime Minister Imran has recently eased it before the impending holy month of Ramazan, where mosques would reopen despite doctors warning. Industries authorized to resume operations include those with export obligations and the cement and construction sectors.
As the government and the SBP work collaboratively, Baqir said: “We have several areas that we are working on and we refine them in light of development.”
“It is more appropriate to talk about them once we feel that the situation is such that we need to do more,” added the governor.
