ISLAMABAD – State Bank of Pakistan (SBP) Governor Shahid Hafiz Kardar on Tuesday cautioned that reliance on central bank s borrowing should be reduced and share of private sector in credit expansion needs to be increased to support investment requirements of the country.
He said this while briefing the meeting of the Monetary and Fiscal Coordination Board, which was chaired by Federal Minister for Finance and Economic Affairs Dr Abdul Hafeez Shaikh.
The SBP governor briefed the meeting on the recent developments on the monetary side. He pointed out that broad money growth was recorded at 9. 3 per cent as compared to 5. 5 per cent of last year.
Together with rising international commodity and oil prices, the inflationary pressure is persisting. Government borrowing has also been a factor even though borrowing from SBP that had surged to a very high level of Rs315 billion during December 2010 has been brought down significantly. He cautioned that going forward deficit should be brought down and reliance on SBP borrowing be further reduced.
More importantly, share of private sector in credit expansion needs to be increased to support investment requirements of the country.
It was further stressed that foreign financing in the budget is also required to be increased so that domestic resources can be freed up for private sector financing.
Finance Secretary Dr Waqar Masud presented an overview of the economy and noted that revised GDP growth target was 2. 4 per cent and next year growth has to be accelerated to make up for the lost growth due to floods and consequent slowdown in economic activities. He also noted that external sector had rendered extraordinary performance both on account of exports growth of 27 per cent and remittances growth of 22 per cent so far during the fiscal year. Besides strengthening the current account and the level of reserves, these developments had positive effect on exchange rate that remained stable throughout the year.
On the budgetary outlook, it was pointed out that fiscal position has improved considerably from the first part of the fiscal year and significant adjustment will take place relative to the last year.
The Finance Minister, in his opening remarks, stated that the Coordination Board was an important institution for bringing consistencies in monetary, fiscal and exchange rate policies and its meetings were required to be held regularly to ensure that all economic managers were working on a shared set of objectives.
He expressed some concern that the meetings of the Board were not held as frequently as required and urged that in future these meetings must be held regularly as per stipulated in SBP Act, 1956.
The Finance Minister expressed the hope that the deliberations of the Board will lead to better economic coordination and that the challenges facing the economy will be coped in a coordinated manner by all institutions involved.
Forex open Market rates & comments Archive