*The moderately accommodative monetary stance adopted by Pakistan is the‘right approach’ in the present circumstances, said Governor State Bank ofPakistan (SBP) Reza Baqir.*
Talking to *CNBC* on the current economic trajectory of Pakistan, GovernorSBP stated: “The signal that this time we wanted to convey in our MonetaryPolicy Committee meeting was not only that we left the rates unchanged, wehave done that in the previous meetings as well but the new element in ourstatement was the forward guidance that we provided, which is that in thenear term and in the absence of unforeseen developments, we see monetarypolicy settings remaining unchanged.”
“The reason we wanted to give this guidance is that we are growing moreconfident that the current macroeconomic settings i.e. moderatelyaccommodative monetary stance and continued fiscal restraint is the rightapproach right now to give a sense of comfort and stability to investorsand equally importantly a sense of policy predictability, as you know thecost of withdrawing stimulus too soon are much higher than withdrawing ittoo late,” he said.
About the sectors that would contribute to the economic recovery ofPakistan SBP chief Baqir said, for the last several months’ cement saleshave been in the range of 20% Year on Year (YoY) growth. In November carsales posted 33% YoY growth, the manufacturing index was up 14% YoYNovember.
Baqir said that “these numbers point to the emerging recovery that iscurrently underway in Pakistan.”
Talking about the export sector, Baqir stated that Pakistan’s monthlyexports have now recovered to the average levels in the previous fiscalyear and the momentum in the recent monthly outturns is quite encouragingabout the “future outlook for export growth.”
On striking a balance between growth comeback and inflation rising the SBPgovernor said that currently, our output gap is negative. “There are verylittle if no signs of demand-driven inflation pressures and last we see nocorrelation between wage growth and inflation. All of this leads us toconclude that recent inflation has been supply-side due to shocks to foodprices and more recently international oil prices. We, therefore, see thatas temporary and for inflation expectations to remain anchored,” he said.
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