Pak central bank says govt failed to achieve financial, price stability despite sacrificing growth
Dec 24, 2022
Islamabad [Pakistan], December 24 : The incumbent government avoided focusing on growth for the fiscal year FY23, resulting in a drop in growth, the State Bank of Pakistan has said in its annual report, according to Dawn. Despite sacrificing growth, Pakistan's government has not been able to achieve price stability and financial stability.
Citing international experience, Pakistan's central bank in its annual report said that the countries that prioritise growth at the expense of price and financial stability are not able to "sustain growth and have repeated boom-bust cycles followed by financial crisis."
"International experience has repeatedly shown that countries that prioritise growth at the expense of price and financial stability are not able to sustain growth and have repeated boom-bust cycles -- rapid economic growth followed by a financial crisis," the State Bank of Pakistan said in its annual report as per Dawn.
In the report on 'State of the Economy for the fiscal year FY22', the State Bank of Pakistan has estimated that growth in FY23 would be less than the low range set for the year, according to Dawn. It further said that the growth rate will remain lower than 3-4 per cent.
Pakistan's central bank did not provide a new range for the growth rate. However, international credit rating agencies have been predicting that the growth rate will be around 2 per cent.
As per the Dawn report, the sharp drop in growth has caused heavy lay-offs from trade and industrial sectors. Textile millers, exporters and importers have been raising concerns over the non-opening of letter of credit that has affected the business cycle.
Although the government focused on prices, inflation for the past five months is hovering around 25 per cent which indicates worsening prospects for stability and growth, as per the news report.
"International experience has shown that price stability is a necessary condition for sustained growth and development," the SBP report said, adding that countries, where price stability is a primary objective, tend to have lower inflation, as well as less volatility in both inflation and growth.
Citing the SBP report, the news report said that the Pakistani government has not been able to achieve any one of these targets despite not focusing on growth. The SBP's price stability objective is reflected in the government's medium-term inflation target of 5-7 per cent.
According to the SBP report, supply-side factors, like changes in the price of energy and food, can be caused by both domestic and international developments and can often be difficult to predict. The report said that inflation depends on the outlook for international commodity prices and exchange rate developments.
According to Dawn, the SBP report said, "In Pakistan, the coverage and timeliness of information needs improvement and there are often large revisions to 'annual' GDP growth estimates relative to provisional estimates. These, together with scarce availability of high frequency real sector data, complicate forecasting and real-time decision making."
