STATE Bank of Pakistan (SBP) says controlling inflation and having a vibrant financial sector are the top two priorities while supporting the government for implementing its economic growth policies comes in third place. Speaking at the sixth “Pakistan Leadership Conversation 2023”, organized by the ACCA on Wednesday, State Bank of Pakistan (SBP) Deputy Governor Sima Kamil said that the central bank had three clear objectives at present – price stability, financial sector stability and supporting the government’s economic growth policies as long as first two objectives are not compromised.
The remarks of the Deputy Governor would definitely be welcomed by people of Pakistan as they are experiencing the worst inflationary pressure in the history of the country. The intention to strengthen the framework that would enable the bank to carry out its responsibility in this regard is also a positive indicator as the central bank had planned to deploy Big Data and artificial intelligence (AI) technologies in the near future to improve work on price stability, as stable inflation would provide a strong basis for sustainable economic growth.
A team of the bank would meet small and large-scale businesses to access and gain economic intelligence on consumer demand, manufacturing, construction, capacity utilization and investment plans. However, there is a growing impression that both the SBP and the Ministry of Finance were not fulfilling their responsibilities satisfactorily as far as inflation is concerned. This became evident when banks minted money through devaluation scam but no action has been taken against them despite passage of months and the practice continues. Similarly, there are frequent reports about smuggling of dollars to foreign countries, especially Afghanistan, but here again there is complete silence on the governmental front. The SBP has regularly been hiking the interest rate on the plea of containing inflation but so far there is no indication that the measure contributed anything substantial towards that goal. Instead, there are reasons to believe that an increase in interest rate hikes the cost of doing business and this is reflected in goods and services, making the price situation worse. Interest rate needs downward revision but it is widely believed that the SBP is set to hike it further by two points.