SBP – a pillar of business support


Pakistan has been recognized globally for its rapid economic recovery after the Covid-19 pandemic compared to comparable economies and even before developed countries.

Among other things, the central bank and its leaders reacted aggressively to the challenges that presented themselves during the pandemic and protected the economy with timely measures and initiatives.

The Express Tribune conducted a brief investigation into whether the State Bank of Pakistan (SBP) has taken proactive steps with Governor Reza Baqir at the helm.

Different stakeholders said that the institution, through its team, has taken a number of steps to strengthen the economy in order to absorb shocks, tackle hazards and remain resilient.

They believe that institutions are established or destroyed by the performance of their teams, and putting the right person at the top is a must in motivating team members.

Baqir is a competent governor of the central bank. He listens to stakeholders including bankers and businessmen with an open mind and consults on emerging issues and challenges with his deputy governors, economists and other team members to find possible solutions.

They particularly commended the active role of the central bank in digitizing the financial sector and the economy as a whole. Although digitalization gained ground during the pandemic, a rapid recovery in the economy would not have been possible without the availability of prior infrastructure since the pre-Covid era.

“Dr Reza Baqir is an extremely thoughtful, proactive and forward-looking Governor of the State Bank,” Pakistan Stock Exchange CEO Farrukh H Khan said in comments to The Express Tribune.

Under his leadership, the SBP took a number of important steps to stabilize the economy and move it on a growth path, at a time when Pakistan faced many challenges, including the coronavirus pandemic, a he declared.

While dealing with the crisis, he has also undertaken a number of important long-term initiatives, which Khan says will be transformative for Pakistani financial sector.

“The initiatives include expanding the digital landscape through the RAAST system (an instant and easy payment system). Another step in this direction is the installation of Roshan digital account for overseas Pakistanis. This is an important and important step that for the first time allows overseas Pakistanis to seamlessly open online bank and brokerage accounts.

“This is also a huge step forward towards closer collaboration between the banking sector and the capital markets, which is important for Pakistan’s economic development. I would like to underline the governor’s interest and leadership in this area. “

Pakistan Business Council CEO Ehsan Malik said, “The governor listens to business and the bank is open to changes in its policies. It is refreshing. One example is the recognition that monetary policy is not an appropriate tool to control supply-induced inflation. “

He said: “The SBP has been a supporting pillar in preserving jobs and helping businesses manage the cash flow impact from Covid. At the same time, the SBP offered companies the opportunity to invest via the TERF (Temporary Economic Refinance Facility) at a fixed rate of 10 years.

“I am particularly impressed with the way the bank is moving towards the digitalization of the economy and to facilitate a greater global connection of our exporters by changing policies affecting investments in brands and companies abroad. “

AHL chairman Arif Habib recently said that the central bank’s decision to cut the benchmark interest rate by 625 basis points between March and June 2020 to 7% provided a large margin for growth in businesses and the economy as a whole.

“Lower interest rates have lowered the cost of borrowing for businesses. It has enabled businesses to quickly recover from the impact of Covid-19 and become profitable again … and has helped the economy and the stock market to grow. “

Among many other measures, the central bank recently took a policy initiative to increase the participation of women in financial inclusion, banking and the well-being of the economy.

To this end, the SBP has launched a consultation on the theme “Leveraging Equality Policy: Closing the Gender Gap in Financial Inclusion”.

“If women are excluded, we suffer at the macroeconomic level,” SBP Deputy Governor Sima Kamil said in a webinar.

The central bank and its leaders have been widely praised for liberalizing the exchange rate mechanism by letting market forces decide the rupee-dollar parity in the interbank market since the third quarter of 2019.

The market based exchange rate is based on the demand and supply of dollars in the system. “It’s the beauty of the newly implemented market-based exchange rate mechanism that the rupee moves back and forth against the US dollar,” said the chairman of the Association of Exchange Companies of the United States. Pakistan, Malik Bostan.

Baqir was also a key member of the Prime Minister’s economic team. He was among the officials who played a pivotal role in acquiring the $ 6 billion International Monetary Fund (IMF) loan facility in May 2019 to manage the balance of payments.

He is once again active in the resumption of the loan program which has been on hold since the Covid-19 epidemic in Pakistan at the end of February 2020.

Other notable measures taken by the central bank include offering concessional loans to the housing and construction sector, hospitals and businesses to help them pay their staff salaries during the pandemic.

In addition, bank loans worth billions of rupees have been postponed or rescheduled to avoid corporate and household defaults.

The writer is a staff correspondent

Posted in The Express Tribune, January 18e, 2021.

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