Governor State Bank of Pakistan (SBP), Raza Baqir says that the current account deficit during the last fiscal year was 8.1 billion dollars. The current account deficit is lowest it has been in the last 10 years.
Raza Baqir while addressing a press conference along with SBP officials, announced the decision to keep the interest rate at 7%.
“The incumbent government is taking measures to control inflation and bring down prices of essential commodities,” said Baqir, adding that the main reason to maintain the interest rate is to focus on growth.
Baqir said that this is the fifth consecutive time that the central bank has decided to maintain the policy rate.
He said that the policy rate is lower than the inflation rate. "Economic experts term this a negative interest rate," he said.
Raza Baqir also commented that inflation has been reduced from 9 percent to 8.9 percent in June. “The country’s exchange rate reached the same level it was two years ago,” he added. The SBP Governor said that the economy is performing well and with this the inflation will go down slowly.
Dr. Raza Baqir said that current account deficit increased in May and June. Current account deficit increased due to seasonal effects. Current account also increased due to new imports. Food imports remained substantial. The current account growth rate is slower than it was in the past.
Exports increased by 13.7% as compare to last year and will continue to increase in the current financial year, Raza Baqir said.
The Governor SBP said that the exchange rate has improved. The exchange rate has fluctuated. The exchange rate is market based.
He said that they want to develop the housing and construction sector. Loans are being given to the lower class people. Banks have so far received Rs 124 billion applications for housing, he added.
Meanwhile, the SBP's statement said since its last meeting in May, the MPC was encouraged by the continued domestic recovery and improved inflation outlook following the recent decline in food prices and core inflation.
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 2-3% of GDP in FY22.
"Notwithstanding this moderate current account deficit, the country’s foreign exchange reserves position is expected to continue to improve this year due to adequate availability of external financing," it said.