A recent ‘Transcript of Global Financial Stability Report April 2024 press briefing’, carried a rather very pertinent question regarding a possible need to revisit policy focus traditionally to control inflation through mainly reliance on interest rate, pointing out in addition in the question ‘Continuously with that very dosage of that very prescription has kind of hurt the middle income and the lower middle income; but, of course, it has not given the results out there.’

The reply by Tobias Adrian from the International Monetary Fund (IMF) was: ‘You know, Pakistan is in a program. And there are really macro challenges, which include the financial sector and central bank policies but also broader macro and fiscal issues.

And, you know, the adjustments oftentimes take some time to take hold.’ Moreover, replying to the same question, Jason Wu from the IMF indicated: ‘It is, indeed, the case that both the supply and demand side contribute to inflation. So in that sense, policy is needed on both sides. In the case of Pakistan, for example, monetary policy has been tightening over the past two or three years to control inflation.

And inflation is projected to come down, but more work needs to be done. And that includes on the demand side; fiscal consolidation needs to be continued. But also on the supply side, including things like, you know, the reform of the energy sector, state[-]owned enterprises.’

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