KARACHI: Pakistan’s central bank on Tuesday projected the country’s economic growth rate to remain between four and five percent during the current fiscal year, as it revised its earlier forecast of 3.9 percent due to domestic economic recovery and improved inflation outlook.
The central bank also decided to keep the key policy rate at seven percent, a stance it has been maintaining since June 2020.
“The Monetary Policy Committee [MPC] was encouraged by the continued domestic recovery and improved inflation outlook following the recent decline in food prices and core inflation to keep the policy rate unchanged,” said Governor State Bank of Pakistan (SBP) Dr. Reza Baqir while addressing a virtual news conference in Karachi.
“Besides, the consumer and business confidence have risen to multi-year highs and inflation expectations have fallen,” he said, adding: “Due to these positive developments, growth is projected to rise from 3.9 percent in FY21 to 4-5 percent this year.”
The SBP governor maintained the key risk to economic growth could come from the spike in COVID-19 cases amid a low vaccination rate.
“The MPC felt that the uncertainty created by the ongoing fourth COVID-19 wave in Pakistan and the global spread of new variants warranted continued emphasis on supporting the recovery through accommodative monetary policy,” he added.
Discussing the country’s current account deficit, he said the imports were expected to grow on the back of the domestic economic recovery.
“The MPC noted that the market-based flexible exchange rate system, resilience in remittances, an improving outlook for exports, and appropriate macroeconomic policy settings should help contain the current account deficit in a sustainable range of two to three percent of the GDP in FY22,” he added.
Baqir said that Pakistan’s economic recovery was primarily driven by large-scale manufacturing, construction and service sectors.
He added that growth was further expected to pick up during the current fiscal year due to several measures announced in the budget.
Such measures include increased development spending along with reduced regulatory duties and sales tax on the import of raw materials and capital goods.
“These measures will directly benefit the construction and allied industries, as well as export-oriented industries. Agricultural growth is also expected to contribute favorably [to the economy] despite reported water shortages at the start of the sowing period of Kharif crops,” the SBP governor said.
The governor said that Pakistan’s external position was at its strongest in the last several years.
“This is the lowest current account deficit in 10 years, supported by all-time high exports and remittances. The SBP’s forex reserves rose by $5.2 billion during FY21 to end at over $17 billion or around three months of imports,” he added.
Pakistan’s central bank raises GDP forecast to 4-5% amid domestic economic recovery
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Pakistan’s central bank raises GDP forecast to 4-5% amid domestic economic recovery
- The State Bank of Pakistan decides to retain the key policy rate at seven percent, a stance it has been maintaining since June 2020
- The central bank governor says the risk to economic growth could stem from a surge in COVID-19 cases amid a low vaccination rate
Pakistan joins regional talks on Afghanistan in Iran as Kabul stays away
- China, Pakistan, Pakistan, Tajikistan, Uzbekistan, Turkmenistan all joined talks organized by Iran, as did Russia
- Afghanistan was invited but decided not to attend, Taliban-led government was tight-lipped on the reasons
TEHRAN, Iran: Afghanistan’s neighbors met in Iran and agreed to deepen regional coordination to address political, economic and security challenges, as well as calling for sanctions on Afghanistan to be lifted.
The only absent party? Afghanistan itself.
China, Pakistan, Pakistan, Tajikistan, Uzbekistan and Turkmenistan all joined the talks organized by Iran, as did Russia, according to a statement released after the meeting on Sunday.
Afghanistan was invited but decided not to attend. Its Taliban-led government was tight-lipped on the reasons, with the foreign ministry saying only that it would not participate because Afghanistan “currently maintains active engagement with regional countries through existing regional organizations and formats, and has made good progress in this regard.”
The statement from the talks in Iran stressed the importance of maintaining economic and trade ties with Afghanistan to improve living conditions and called for the country’s integration into regional political and economic processes.
The Taliban were isolated after they retook power in Afghanistan in August 2021, but in the past year, they have developed diplomatic ties. They now raise several billion dollars every year in tax revenues to keep the lights on.
However, Afghanistan is still struggling economically. Millions rely on aid for survival, and the struggling economy has been further impacted by the international community not recognizing the Taliban government’s seizure of power in the wake of the chaotic withdrawal of US-led troops in 2021. Natural disasters and the flow of Afghans fleeing Pakistan under pressure to return home have underlined Afghanistan’s reliance on foreign aid to meet essential needs.
The countries at the talks also voiced security concerns and pledged cooperation in combating terrorism, drug trafficking and human smuggling, while opposing any foreign military presence in Afghanistan. They underscored the responsibility of the international community to lift sanctions and release Afghanistan’s frozen assets, and urged international organizations to support the dignified return of Afghan refugees from neighboring countries.
The participants backed efforts to reduce tensions between Afghanistan and Pakistan, which have been particularly strained, with border clashes between the two sides killing dozens of civilians, soldiers and suspected militants and wounding hundreds more.
The violence followed explosions in Kabul on Oct. 9 that Afghan authorities blamed on Pakistan. A Qatar-mediated ceasefire has largely held since October, although there have been limited border clashes. The two sides failed to reach an overall agreement in November despite three rounds of peace talks.
Asif Durrani, Pakistan’s former special representative for Afghanistan, said the Taliban government’s decision to skip the meeting reflected a “lack of political maturity.”
Writing on X, Durrani said the move reinforced concerns that the Taliban were unwilling to negotiate, instead adopting an “I don’t accept” stance that he said would do little to resolve serious regional problems.
Mohammad Sadiq, the current Pakistani special representative for Afghanistan who attended the talks, wrote on X that the Afghan people had already suffered enough and deserved better.
Only an Afghanistan that does not harbor militants would inspire confidence among neighboring and regional countries to engage meaningfully with Kabul and help unlock the country’s economic and connectivity potential, he wrote.
Participants agreed to hold the next meeting of foreign ministers of Afghanistan’s neighboring countries as soon as possible in Ashgabat, Turkmenistan, and welcomed Pakistan’s offer to host the next round of special envoys’ talks in Islamabad in March.
Iran’s foreign ministry spokesman, Esmail Baghaei, on Sunday said that the meeting had not been held for about two years and marked the first such gathering attended by special envoys on Afghanistan from neighboring countries as well as Russia. Russia and Uzbekistan sent the special envoys of their presidents, while Pakistan was represented by a delegate from the prime minister’s office.
Landlocked Afghanistan is sandwiched between the Middle East, Central Asia, and South Asia, making it strategically located for energy-rich and energy-hungry nations.
