Dr. Murtaza Syed, the Acting Governor of the State Bank of Pakistan (SBP), claimed in a podcast that Pakistan is neither Sri Lanka nor near to it, and that Pakistan’s excellent six percent GDP growth over the previous two years is a surprise to the rest of the world.
“There is no question that the economy is encountering difficulties, and many nations’ economies are in jeopardy as a result of rising commodities prices after COVID.” “Sri Lanka is one of them,” Dr. Syed said in the SBP podcast, “but they did not manage properly and made certain poor or late judgments that caused issues for the country.”
“Pakistan is not Sri Lanka,” he remarked. COVID wreaked havoc on the country, as tourism revenue dried up. The tourism-based economy was unable to overcome the obstacles. They allowed the budget deficit to grow for two years, putting strain on the current account. For two years, they did not raise the interest rate. Sri Lanka held the exchange rate steady for two years, implying that they used their reserves to keep the rate at the targeted level. It eventually resulted in a huge current account deficit and the depletion of their foreign currency reserves.”
“The only method to plug the current account is to dump dollars into the market,” he added, “which degraded reserves; eventually, the exchange rate shot up by 50-60% overnight.”
To read our blog on “SBP has raised the interest rate on dollar deposits,” click here.
