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Monetary Policy in Economic Correction


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Interim Finance Minister Dr. Shamshad Akhtar highlighted the significance of Pakistan’s monetary policy in addressing the country’s economic challenges caused by fiscal imbalances. She pointed out that the ever-widening gap between revenue and spending necessitates the utilization of the key interest rate to rectify the situation. Dr. Akhtar made these remarks during a gathering organized by the Korangi Association of Trade and Industry (KATI) in Karachi. As the State Bank of Pakistan (SBP) prepares to announce its monetary policy on October 30, these comments shed light on the government’s approach to stabilizing the economy.

In her speech, Dr. Akhtar acknowledged the current fiscal imbalance and the high current account deficit. She argued that the solution to such economic woes primarily lies in the realm of monetary policy, especially the adjustment of key interest rates. While the interim setup has not completely curbed inflation, she contended that it is gradually receding.

Furthermore, Dr. Akhtar highlighted the effective implementation of programs by international financial institutions, including the World Bank and the International Monetary Fund(IMF). She mentioned an upcoming visit by an IMF delegation on November 2, during which the progress in implementing the IMF program would be presented.

The interim finance minister expressed confidence in the IMF program’s progress, anticipating inflows from other multilateral institutions once the IMF disburses its expected tranche of $700 million.

Dr. Akhtar also acknowledged the challenges faced by various industries and promised to address their concerns. She revealed that an economic recovery plan has been formulated under the interim government’s directives, reflecting their commitment to revitalizing the economy.

She emphasized the urgency of the economic recovery process, given the economic challenges inherited by the interim government. Dr. Akhtar reassured the public of their dedication to expediting this process, recognizing the need for a swift turnaround.

While discussing economic growth, Dr. Akhtar forecasted a growth rate of approximately 2% to 3%. This estimation aligns with the cautious estimate provided by the World Bank.

The finance minister celebrated some of the interim setup’s accomplishments, pointing out that the large-scale manufacturing and power sectors experienced growth for the first time in 14 months. The production of cement and tractors improved, and fertilizer sales witnessed rapid recovery. Cotton production surged by 80%, and loans acquired by farmers increased by 44% during the period from July to September.

Dr. Akhtar also drew attention to the stability of the exchange rate, highlighting that the dollar had stabilized at Rs279 in the interbank market, signifying an 8% improvement in the value of the Pakistani rupee. She credited law enforcement agencies for curbing the smuggling of dollars at the borders and commended the reforms in exchange companies for their role in strengthening the rupee.

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