SBP Governor Forecasts Current Account Deficit to Go Down After Two Months

Dr. Reza Baqir, Governor of the State Bank of Pakistan (SBP), has stated that Pakistan’s current account deficit (CAD) will continue to rise for the next two months before gradually subsiding.

Discussing the current account woes on a talk show, the SBP governor predicted the deficit to reduce in early 2022 and asserted that the 13.25 percent interest rate situation will not reappear.

He believed that the country was in a terrible financial meltdown the last time interest rates reached 13.25 percent. The current account deficit was $19 billion at the time, and the crisis necessitated drastic measures during the period in question, he opined.

The Central Bank governor expressed confidence that the country’s economic growth will continue to be around five percent during the current financial year. He claimed that the Finance Division and the SBP worked well together to ensure financial growth. He said that now all choices had been made on time and that the country will not fall victim to episodes of drastic economic conditions as seen in the past.

Commenting on the recent interest rate hike, Dr. Reza Baqir said that the policy rate hike always helps those who deposit their money in bank accounts. He stated that the Central Bank had issued detailed instructions to boost industrialists’ decision-making confidence and to better accommodate any related financial instruments.

In terms of the wider picture for the economy’s progress so far and the factors impeding it during the ongoing financial year, the governor said that the COVID-19 pandemic had impacted even the most powerful economies, with the United States experiencing unparalleled levels of inflation.

The Rupee is struggling, he said, adding that the SBP and the government were working together to put a stop to its volatile descent. He claimed that the rise in commodity prices on the international market was unusual and went against Pakistan’s expectations.

Regarding money raised through bonds, the governor was of the view that the treasury bill (T-Bill) auction on December 1 was unnecessary. The government raised almost Rs. 500 billion in the T-Bill sale at a significantly higher rate as compared to their previous auction.

He vowed that it would not happen again and that if such a circumstance arose in the future, the SBP would handle it instead of the Finance Division. Subsequently, he stated that effective meetings with the International Monetary Fund (IMF) had taken place and would yield results soon.