KARACHI: Central bank’s acting governor Dr Murtaza Syed said on Friday pressures on forex reserves, currency and current account are temporary an
KARACHI: Central bank’s acting governor Dr Murtaza Syed said on Friday pressures on forex reserves, currency and current account are temporary and are being forcefully addressed through proactive and concerted policy measures.
“When the FX market becomes disorderly, the State Bank (of Pakistan) does intervene to calm the markets and will continue to do so, as needed, in the future,” Syed told senior management of Pakistan Stock Exchange (PSX). “At the same time, strong steps to counter any speculation have also been taken, including close monitoring and inspection of banks and exchange companies.”
The rupee came under significant pressure during June and July 2022, primarily due to a stronger dollar worldwide, deterioration in the current account deficit, and domestic political uncertainty.
However the “recent rally in the rupee is on account of a narrowing of the current account deficit and improved domestic sentiment,” Syed said. “In this context, it will be important to ensure that imports remain at a sustainable level going forward, including energy imports.”
The SBP governor said imports are expected to decline the in coming months owing to some ease in global commodity prices as well as domestic demand moderation due to policy initiatives.
“SBP’s monetary policy stance and measures to reduce the import bill were prudent and necessary for dissipating inflationary pressures and consequently for sustainable growth in the medium-term”.
SBP also informed PSX officials that payments under foreign currency contracts and L/Cs will soon be back to normal.
On external sector sustainability, Dr Syed emphasized that uncertainty around the IMF program has been resolved with the announcement that the board meeting for the next IMF review will take place on August 29. He outlined Pakistan’s external financing needs over the next 12 months, noting that the IMF program ensures that these will be fully met. In fact, thanks to the $4 billion of additional financing commitments from friendly countries that has recently been secured, Pakistan will be over-financed. This will provide an additional boost to Pakistan’s FX reserves in FY23.
The issue of dividend announced by NBP was also raised and SBP assured an early resolution of the matter. Other issues discussed included margin financing, inclusion of sukuks and TFCs in the definition of ADR, allowing a portion of the Yuan/PKR swap line for capital market investments and ease of opening SCRA accounts. It was agreed to set up a SBP – capital markets coordination committee to discuss and resolve these and other matters.
The meeting also discussed broader economic issues and on matters impacting the capital market more directly.
The acting governor also delivered a presentation to the participants at the meeting wherein a comparison of Pakistan’s economy was made with other emerging economies and the fact that Pakistan has performed relatively well in comparison with some countries was highlighted.
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