Inflation, financial sector top priorities

The Central Bank of Pakistan has said fighting inflation and a vibrant financial sector are top priorities, with supporting the government’s implementation of economic growth policies a third.

Speaking at the 6th Pakistan Leadership Conversation 2023 hosted by ACCA on Wednesday, State Bank of Pakistan (SBP) Deputy Governor Sima Kamil said the central bank now has three clear goals.

“The first is price stability, the second is financial sector stability, and the third is support for the government’s economic growth policies as long as the first two objectives are not undermined.”

She suggested that central banks will use big data and artificial intelligence (AI) technologies to step up their efforts on price stability in the near future, as stable inflation provides a strong foundation for sustained economic growth. Said it was planned.

“At SBP, we are currently strengthening our statistics department. Going forward, we will leverage big data and AI to improve data quality for measuring CPI inflation, while using satellite imagery to tracks multiple layers of different data…” she said. “We have a team of people meeting SMEs to access and extract economic information on consumer demand, manufacturing, construction, capacity utilization and investment plans. It will cover the current and future state of the economy,” she added.

She emphasized the need for decarbonization and digitalization of society and the economy to work to ensure a better future.

The SBP Deputy Governor said the central bank’s Monetary Policy Statement (MPS) not only discussed downside and upside risks to key macroeconomic indicators, but also identified factors that could affect the future.

“For example, we need to monitor global commodity prices. So we’re trying to make a decision on their database, where (major) rate hikes are tailored to the evolving situation.

“Our decisions and communications in uncertain times must be clear and measured.”

Kamil said there are many uncertainties around the world and in Pakistan.The recent pandemic has hit the global economy. “We’ve done it well in Pakistan, but what we faced was a big challenge. We have the global commodity supercycle (high inflation), and the conflict between Russia and Ukraine, and that’s the world. commodities prices and disrupted energy and food supplies.”

“At home, there has been political uncertainty, a delay in the 9th review of the International Monetary Fund (IMF), high inflation, depletion of foreign exchange reserves and currency devaluation. Just when we thought we could adapt to these challenges, we were flooded. ”

She said in times of uncertainty like this, it’s best to take steps to build economic resilience before the crisis begins. “It’s a measure of how well you handled the situation.”

“You need to build foundational risk intelligence to maintain liquidity, maintain solvency and protect your future.”

She added that in uncertain times, leadership must be agile yet measured, and leaders have two choices: oversimplifying problems and exaggerating risks. Be careful.

“Your decisions and communications in uncertain times must be clear and deliberate,” she said, noting that it’s impossible to keep everyone happy in this crisis, so “we need to prioritize.” We must have the courage to wear it,” he added.