Governor SBP speaks of actions to triumph over macroeconomic challenges.

IBA holds lecture on macroeconomic challenges and outlook

The Institute of Business Administration (IBA), Karachi organized a distinguished lecture on "Pakistan's Economy: Macroeconomic Challenges and Outlook," by Governor State Bank of Pakistan, Dr. Reza Baqir, at the IBA Main Campus. The session was moderated by Executive Director IBA Karachi Dr. Farrukh Iqbal, who introduced Dr. Baqir to the audience. Attendees included members from the academia, corporate sector, media, the IBA faculty, students and alumni.

Dr. Baqir divided his lecture in three parts: causes of the current macroeconomic challenges faced by the economy, actions taken by the economic team to address those challenges and the results to date, and the outlook of the economy. He described two main causes of the current macroeconomic challenges. First was the growing current account deficit during 2015-2018, which in the context of an overvalued and relatively fixed exchange rate led to a pronounced depletion of the country's reserves. The second key cause was rising fiscal deficits and public debt which had put in doubt the country's credit worthiness.

To address these economic challenges, Dr. Baqir described three sets of actions that had been undertaken in the following areas: external, fiscal, and monetary. First, a series of exchange rate adjustments since late 2017 had helped reduce the exchange rate overvaluation. These culminated in a change in the exchange rate system in May 2019 to a market-based system so the economic authorities would no longer have to fix the value of the currency. He clarified that a market based exchange rate system was not a free float and allowed for the SBP to intervene to address disorderly market conditions.

He noted that these actions had led to a pronounced improvement in the current account which had halved from its historic high of $2 billion monthly deficit. He also noted that behind the improvement in the current account deficit was a reduction in imports and improvement in export volumes even though export values had grown less due...

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