STATE Bank of Pakistan has issued Financial Stability Review (FSR) presenting a dark picture of the economy even during the next six months. It has apprehended foreign exchange rate risk, balance of payment pressures, widening fiscal deficit and increase in domestic inflation during this period. It has, however, expressed confidence that the actions taken on money laundering and terror-financing would help the country in exiting from the FATF grey-list next month.
The assessment of the central bank should be a cause for concern for policy and decision-makers, who are, no doubt, engaged in hectic efforts to put the economy on the right path but unfortunately these have, so far, not produced the desired results. The assessment that the situation would deteriorate further during the next six months also raises questions about rationale of the measures already taken and the need to review them. We have been emphasizing in these columns that sincerity of purpose of the government leadership notwithstanding, it would be disastrous to take bitter measures in quick succession without giving people and the economy time to absorb the earlier one. Rupee devaluation has played havoc and increased burden on the common man without any salutary impact on any aspect of the national economy. There is urgent need to stabilize the currency but intriguingly the bank responsible for doing so is talking about further devaluation in the next six months. Authorities also need to ponder as to why steps taken to bridge the widening fiscal deficit have not succeeded. As for inflation, this is the sum total of the governmental policies and their continuation would, obviously, increase the inflation.
