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The State Bank Is Underestimating the Threat To Pakistan’s Economy: Brokerage House

This Monday, a local brokerage house pointed out that the State Bank of Pakistan (SBP) underestimates the threats faced by Pakistan’s economy – the threats caused by increased oil prices, squeezing currency and depleting dollar reserves. Accordingly, the State Bank has a bit too “optimistic” attitude which will lead to bad decisions and undesirable results. The analyst said,

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Everything put together, we believe (the) SBP is underestimating pressures on the economy given recent increases in international commodity prices, lack of foreign inflows, pressures on currency, exports etc,

6% Growth Budgeted

The State Bank was in consensus with the government to set and achieve a 6% budgeted growth in Gross Domestic Product (GDP) till 2018. This agreement was made last week.

JS Research’s analyst Syed Atif Zafar said in a critique on the SP’s Monetary Policy Statement (MPS),

While we agree to a certain extent on GDP growth, which we expect to clock in at 5.6% in FY18, the central bank in our opinion failed to address the growing concerns on the external account front,

Bank Interest will remain 5.75%

The bank expects that inflation rates will be contained below 6% in the fiscal year 2018 which is why they are maintaining an interest rate of 5.75%. This rate will remain unchanged for the next two months. The bank is not accounting for the increasing inflation rates properly.

Oil prices have increased already

Oil prices are a major driver of inflation and they are rising. Pakistan depends significantly on oil imports and if both factors – increasing oil prices and currency devaluation are considered simultaneously, it will be a blow to Pakistan’s economy.

The price per barrel has risen to $51.5 – after a ~10$ increase.

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Many other factors are already affecting Pakistan’s economy and if the State Bank continues to increase the country’s debt and remains negligent – the economy will receive a deadly blow.

Via Tribune

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  • what kind of news is that, copying from tribune, without any solid critique, should have rather asked the brokerage house to provide the detailed report, I think PP needs to clear its mind what to to be published on their site,

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