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Govt can’t afford to be complacent about economy

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At a very difficult time, State Bank of Pakistan (SBP) took unprecedented steps to help minimize the impact of COVID-19 on the country’s economy. In quick succession, it announced different relief measures and introduced schemes to counter the effects. It chopped the policy rate by 625 basis points to 7%. It provided stimulus of Rs 1.58 trillion that gave some breathing space to businesses.

Last week, SBP, through its monetary policy statement (MPS), made its intention clear about the policy rate direction by mentioning Monetary Policy Committee’s (MPC’s) viewpoint that financial condition continue to be accommodative. When the central bank uses the word “accomodative”, it assures the borrowers that it will provide liquidity on easy terms by keeping interest rates low and will not hike rates.

Therefore, in the short to medium term, SBP may not take the risk to hike rates and spoil all the hard work it has done so far, which is gathering momentum. Monetary policy is already on a supportive course and is likely to continue. A rate cut cannot be ruled out if there’s a second wave of Covid.

The global economic conditions are still gloomy and brittle, which is why the world financial market is demanding for further cash relief in trillions of dollars. This is bad news for Pakistan’s economy that too needs/demands more fiscal stimulus/space like all other economies.

At this hour of need, any IMF interference could pose a big risk to the economy. Pakistan has to take a firm stand if........

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