KARACHI
\nThe State Bank of Pakistan (SBP), on Friday, emphasized the role of fiscal policy and effective administration for price and financial stability, particularly rationalization of government spending, increasing revenue collection, strengthening food and energy supply chains, and enhancing productivity.
\nThe central bank, in its Governor\u2019s Annual Report (GAR) for the fiscal year 2022-23 issued here, also vowed to continue taking decisions to prevent high inflation from becoming entrenched and keep inflation expectations anchored to achieve the medium-term target of 5-7 % by the end of FY25, with FY24 inflation moderating to 20 – 22 per cent on account of the impact of contractionary monetary policy, improvements in domestic supplies, softer non-energy global commodity prices, and the high base effect.
\nHowever, the Report added that \u201cthis outlook hinges on the absence of adverse shocks stemming from geopolitical tensions and unforeseen climate events, and unfavourable movements in global commodity prices.\u201d
\nThe GAR 2022-23 is published Under Section 39 (1) of the State Bank of Pakistan Act, 1956 which requires the governor to submit to the Parliament an annual report regarding the Bank\u2019s objectives, the conduct of monetary policy, the state of the economy and the financial system.
\nThe GAR stated that fiscal year 2023 was extraordinarily challenging, with a host of external and domestic shocks, amplified by lingering structural weaknesses, contributing to persistently high inflation amid a contraction in economic activities.
\nThe year witnessed the wide-ranging reverberating impact of the devastating monsoon floods, whereas elevated global commodity prices, less-than-envisioned fiscal consolidation, and the delay in the 9th review of IMF\u2019s Extended Fund Facility (EFF) program added pressures on the external account, it added.
\nThe report noted that the average headline National Consumer Price Index inflation surged to 29.2 percent in FY23 but it was in line with multi-decade high inflation in most advanced and emerging economies that maintained an aggressive monetary policy stance.
\nElevated global commodity prices, pressure on external accounts and ensuing exchange rate depreciation contributed to inflationary pressures amid uncertainty over the completion of the 9th review of the IMF\u2019s EFF program, inadequate external inflows and continued scheduled debt repayments, the GAR outlined.
\nThis was in addition to the pass-through of costlier fuel and food prices; exchange rate depreciation; increases in energy prices and indirect taxes; high inflationary expectations and ensuing growth in wages.
\nThe report also noted that political uncertainty weighed on business and consumer sentiments and thus on economic activity. Real GDP contracted by 0.2 per cent, and budgetary targets for the government\u2019s fiscal and primary balances were missed by large margins amid less-than-planned tax revenues and lower-than-budgeted reduction in subsidies.
\nThe SBP responded to these challenges by maintaining a contractionary policy stance, raising the policy rate by a cumulative 825 basis points during FY23, in addition to the 675 basis points increase in FY22, the Report noted.
\nSBP had taken a host of measures to contain domestic demand and imports in the wake of growing pressures on PKR and the general prices, GAR FY23 said adding that while some of these measures were difficult given their implications on economic activity in the short term, they were necessary to meet external debt obligations as per schedule, and contain greater risks to macroeconomic stability over the medium term.
\nRegarding the SBP\u2019s objective of maintaining the stability of the financial system, the Report emphasized that the country\u2019s financial sector grew steadily and continued to meet the economy\u2019s needs for credit and financial services.
\nTotal assets of the banking sector grew by 17 per cent in FY23 while Islamic Banking Institutions (IBIs) performed well during the review period and outperformed their conventional counterparts on several fronts, such as financing and investments along with double-digit growth in deposit mobilization, the Report said.
\nIn addition to fostering economic development and better utilization of resources, the central bank\u2019s measures and initiatives towards its tertiary objective of supporting the government\u2019s economic policies also contribute to primary and secondary objectives, given its foundational impact on monetary and financial systems in the medium to long term, the Report said.
\nIn particular, the Report highlights the SBP\u2019s continued focus on the implementation of the National Financial Inclusion Strategy, the Banking on Equality policy, to expand digital financial services and reduce gender disparities in financial inclusion.
\nAdditionally, the SBP is facilitating the digitization of financial services through digital banks and innovative financial products and systems with comprehensive guidelines on EMIs and cloud service providers, the Report said.<\/p>\n","protected":false},"excerpt":{"rendered":"
KARACHI The State Bank of Pakistan (SBP), on Friday, emphasized the role of fiscal policy and effective administration for price and financial stability, particularly rationalization of government spending, increasing revenue collection, strengthening food and energy supply chains, and enhancing productivity. The central bank, in its Governor\u2019s Annual Report (GAR) for the fiscal year 2022-23 issued […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":{"0":"post-377543","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-top-news"},"yoast_head":"\n