A recent interaction of State Bank Governor Dr Reza Baqir with prospective investors in Dubai evoked strong interest and confidence in Pakistan’s economic policies and the direction in which the country is headed because of sound basis for economic growth.
While giving the audience an insight into the economic conditions of the country, Dr Baqir explained the initiatives taken by the central bank to address several longer-term challenges by promoting investment, financial inclusion through affordable housing and lending to SMEs, digitization of the financial sector and clean energy.
The economic experts agree that the measures taken by the Government as well as the State Bank to help the country stand on its own feet on a long-term basis have started yielding positive results and their trickledown effect too would be visible in the near future.
The professional management of the country’s economy and financial management was highlighted during the peak of Covid-19 pandemic when the majority of the countries of the world witnessed worst scenarios including large-scale lay-offs but Pakistan successfully supported growth while lowering public debt and increasing foreign exchange reserves.
At the recommendation of the SBP, the Government moved quickly and boldly in focusing on public health, poverty reduction and aggressive but time and targeted support for vulnerable segments of the society and key sectors of the economy like construction, agriculture and exports.
It was because of this wise approach that during 2020 Pakistan’s real GDP growth was -1.0 as compared to -10 and -12 in the case of otherwise affluent countriesAnd in 2021, the real GDP of the country stood at 5.6% , a rate much better than many other countries including the United States, Spain, Brazil, Canada, Netherlands, Russia, Australia, Korea, Malaysia, Germany and Japan.
It is also encouraging that the country’s foreign exchange reserves also remained at a comfortable level throughout despite stresses and strains and scheduled repayments.
The SBP Governor also highlighted the measures introduced by the bank to support the economy like refinance facility for new industrial investment and hospitals, Rozgar scheme to prevent lay-offs by financing wages and salaries of employees, relief for loan restructuring to borrowers to combat economic disruptions, principal loan extension programme to ease cash constraints on borrowers and reduction of policy rate by 625 points in a short span of time.
There are, of course, concerns about the rise in inflation but Dr Reza Baqir explained that it was broadly in line with that of other countries and has much to do with an increase in prices of commodities in the global market.
Similarly, the current account deficit is primarily driven by commodity prices, non-oil balance is projected to remain in surplus, in response to coordinated monetary and fiscal policies.
There are also indications that the Temporary Economic Refinance Facility (TERF), launched by the SBP, is unleashing a new wave of industrialization and investment as cumulative disbursements under the programme stood at Rs.282.7 billion as of January 2022.
SBP has also undertaken landmark efforts to digitize the economy that will also boost financial inclusion.
The bank has issued a new detailed framework for two types of licenses – Digital Retail Bank (DRB) and Digital Full Bank (DFB).
The recently launched RAAST initiative is expected to revolutionize the digitization process as it is the country’s first real-time and secure electronic payment system for retail payments that will ensure real-time payment of salaries and pensions, payments to and from small vendors/merchants and person-to-person transfers.
People have also been given simplified and convenient options to digitally open different types of bank accounts — Aasan Digital Account, Aasan Digital Remittance Account and Freelancer Digital Account.
The central bank has also initiated a laudable scheme to promote clean energy in the country aimed at concessional financing.
The scheme is helping fund a large number of renewable energy projects as is evident from the fact that 1,175 projects have obtained funding worth Rs.74 billion for a combined capacity of 1,375 MW.
This would be a major contribution to the promotion of renewable energy in Pakistan which is considered as the most viable option for resource constrained countries.
Similarly, SME Aasan Finance Scheme, launched in August 2021, is also becoming popular as so far 279 applications have been received and an amount of Rs 618 million approved.
All these initiatives are expected to boost economic growth and create vast employment opportunities for people, especially educated and professionally qualified people.
