- The GAR emphasizes lower external account pressure and inflation.
- EFF, deposits of friendly countries lead to exchange rate stability.
- The report also highlights Moderate GDP growth led by agriculture.
KARACHI: While the incumbent government is making efforts to address multi-faceted challenges on the economic front, a report issued by the Governor of the State Bank of Pakistan (SBP) for the financial year 2023-24 has revealed that the country, after this turbulent period has witnessed improvement in key macroeconomic indicators.
The report, issued on Friday, attributed this development to fiscal consolidation, tight monetary policy, lower global commodity prices, improved agricultural production, and reduced external account pressure, which then led to a slowdown in inflation, the accumulation of foreign exchange reserves, and stability in economies. Advanced. market.
The GAR report, published under the SBP Act which requires the Governor to submit an annual report to Parliament regarding the bank’s objectives, state of the economy etc., also highlighted the improvement in the current account, moderate GDP growth and recovery of the economy. Large Scale Manufacturing (LSM) production during FY24.
Pointing to the decline in national CPI inflation, she said the fiscal year witnessed moderate GDP growth led by agriculture, supported by a small but gradual recovery in broad-based manufacturing against a sharp contraction in FY23.
Indicating the cautious approach to monetary easing by the central bank despite positive early signals, it kept the interest rate unchanged at 22% until approximately the end of fiscal year 24, to eliminate the risks of inflationary pressures being deeply entrenched. The report stressed that gradual easing in both… Both countries, headline and core inflation led to a 20.5% interest rate cut in June 2024.
“This stance was complemented by the alignment of fiscal policy with a tight monetary policy stance, as the year saw the first primary surplus in 17 years which also contributed to a notable decline in public debt in terms of GDP,” the report said.
“Official inflows from multilateral and bilateral external creditors following the SBA, coupled with deposit mobilization from friendly countries; and the government’s decision to approach the IMF for the Expanded Fund Facilitation Programme, boosted market sentiment and contributed to stability,” the report added, with emphasis on The economy also benefited from the positive effects of the favorable global economic environment, especially lower commodity prices and a marginal rise in global GDP growth.
Moreover, the financial sector has shown resilience and continued to provide credit and financial services while the total deposits of the banking sector witnessed significant growth due to rising interest rates and State Bank of Pakistan’s efforts towards financial inclusion and digitization of payments. The report also highlighted the growth in the banking sector. Loan delinquencies in the sector remained under control, and capital adequacy ratio, asset quality and liquidity indicators improved.
From a financial sector digitization perspective, the report highlighted the launch of SBP’s Raast “Person-to-Merchant” service, which is set to accelerate the digitization of business transactions across Pakistan, by enabling payments via QR codes, Raast Alias and IBAN. And request payment.
The report also noted the major achievement of signing a memorandum of understanding with the Arab Monetary Fund (AMF) to integrate the Raast payment system with the AMF’s Buna cross-border payment system.