April 17, 2020 (MLN): Governor of State Bank of Pakistan, Dr. Reza Baqir recently appeared on a talk show where he discussed the impact of the COVID-19 on Pakistan’s economy and the measures taken by the government to tackle the situation.

The Governor said that before the outbreak of coronavirus, the country’s fundamentals were quite strong, the stock market and local currency were showing improvement and the economy was performing well.

Nonetheless, he was hopeful that after the pandemic, the economy will again start performing well.

He said that several international financial institutions such as the International Monetary Fund, World Bank and Asian Development Bank will be providing financial support to Pakistan during this time.

IMF has approved USD 1.4 billion under rapid finance instruments for Pakistan.

Reza Baqir further said the economy of Pakistan was facing similar issues to that of the developing nations.

Moreover, he informed that the State Bank was closely monitoring various ups and downs in the economy. Regarding the cut in Policy Rate by 225 bps, the Governor stated that it had been reduced keeping in mind the global changes.

He also said that in the next fiscal year, the inflation rate shall range between 7% to 9% whereas, by the end of the current fiscal year, the inflation rate shall stand around 11%.

With respect to the rupee depreciation, he said that Pakistan wasn’t the only country that was facing exchange rate issues. As compared to the 11-12% decline in the exchange rates of developing countries, Pakistan’s currency was down by just 7%, he added.

Since the situation is uncertain, the exchange rate is showing erratic movements, he explained. However, he said that support from international financial institutions will help in boosting foreign exchange reserves which in turn will result in rupee appreciation.

Talking about G20 Countries’ decision to relax debt payments from May to December of the current year, he said that it shall give relief to Pakistan and reduce pressure on the current account and foreign exchange reserve position of the country.

During the process, the debts will be rescheduled and new debts will be payable from June 2022, he added. He also said that besides the provision of additional funds, G20 IMF and World Bank shall mos likely provide more debt relaxation.

He also said that the fundamentals of Pakistan’s banking industry were strong as banks continue to support the schemes launched by the SBP.

Currently, 80,000 borrowers have applied for rescheduling of loans, the value of which amounts to nearly 20 billion rupees currently, he said.

He also informed that the SBP has introduced a loan scheme to protect salaried class, which will also positively help companies.

For filers, the interest rate will be 4% and non-filers 5%, he further stated.

To increase online transfers, the SBP had introduced Digital payment but fees issue was being a hurdle for many people. Therefore, to improve digital payment, the Governor said that the country was getting the full support of the World Bank.

He also spoke about the chances of a rise in non-performing loans under the current situation but assured that Pakistan’s banking system has enough potential to overcome this issue.

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