RECORDER REPORT

KARACHI: Dr Reza Baqir, Governor State Bank of Pakistan (SBP) Friday said that Pakistan's economic outlook is improving as policy measures taking place are now addressing the microeconomic economy imbalances.

While, addressing the fourth Institute of Bankers Pakistan (IBP) Banking Award ceremony held at a local hotel, Baqir said that market-based exchange rate and zero lending to government by the State Bank are two key developments with the outset of this fiscal year.

Previously, a fixed exchange rate widened the current deficit, however, the recently introduced market-based exchange rate regime has helped contain the rising current account deficit, he maintained.

He said that a massive reduction in CA deficit has also provided a cushion to build the depleting foreign exchange reserves. "A notable improvement has also been witnessed in FX reserves as they surged from $7 billion to $11 billion during last few months primarily due to improvement in current account," he added.

He said the move of market-based exchange rate has made the rupee competitive and propped up exports. The Governor SBP also thanked banks and their treasuries for supporting the SBP initiative of market-based exchange rate.

He said another key development is that the SBP is not lending to the government, because inflation goes up, when government borrows from the SBP.

Baqir said fiscal reforms are also adding to significant growth in revenues. Policy rate is appropriate to reduce the inflation and still the real rate is less than many other countries.

"With these key developments, the outlook for the real economy is improving but it will take time," he said and added that the latest business confidence indicators have been improved in the survey after six months.

He talked about three key priorities saying that "we need to re-grow our exports and join the rest of the world. The SBP is already facilitating the export sector by providing soft loans under the export refinance schemes to increase the country's exports," he added.

He said that second key priority is current account. "We need to raise our saving rate to finance higher investments without recurring account deficit."

Thirdly, financial inclusion is most important for the SBP. "We need to enhance financial inclusion so that the benefits of prosperity are more widely shared," the governor SBP maintained.

He, however, noted the banks were heavily investing in the government sovereign papers like Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) and urged the banks to lend more to the private sector to help economy to grow.

"Banks should lay focus on SMEs and private sector financing. SME, agriculture and housing sectors are important for the economy and we will encourage banks to promote these sectors," he added. Baqir said that with the support of banks, the SBP has made significant progress relating to FATF.

Meanwhile, banked the unbanked award was won by Mobilink Microfinance Bank, best Microfinance Bank award by Khushhali Microfinance Bank, best bank for Small & Medium Business was won by Habib Bank Limited and best bank for agriculture award went to National Bank of Pakistan.

Habib Bank Limited also won the best investment bank award, the best customer franchise award by Bank Alfalah Limited while best bank of Pakistan award 2019 was won by Bank Alfalah Limited.

Mansur-Ur-Rehman Khan, Chief Executive of IBP, Hameed Haroon of Dawn Group, Salman Hussain of A F Ferguson & Co and Syed Saleem Raza former governor SBP were also present.