KARACHI: The country has succeeded in entering a sustainable economic growth phase after attaining stability and will keep moving forward to achieve a high growth rate, said State Bank of Pakistan Governor Dr Reza Baqir on Wednesday.

Despite a negative real interest rate, the central bank has kept its policy rate unchanged at seven per cent to allow the economy to grow, Dr Baqir said while addressing a conference on Sustainable Growth and Promoting Digitisation. The moot was attended by the representatives of business community and office-bearers of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

The country has successfully completed the transitional period, but we would not go for a boom and burst strategy as it happened in the past; neither very high economic growth nor very low rate of growth is acceptable, Mr Baqir asserted.

He said a lot of talk about sudden appearance of current account deficit in June is going on, but the real situation is that June usually see higher payments. Also, the imports have been rising since the economy is on the high growth path.

He said there should be concerns on three directions if the current account deficit (CAD) is rising. First, the exchange rate should respond to the CAD and if it does not it means the exchange rate has been artificially managed which is a negative symptom for the economy.

He said the CAD size also matters. The country expects the CAD to be in the range of 2 to 3pc of GDP in the current fiscal year, which is not much higher as compared to 6pc in 2018 when it widened to $19bn.

Lastly, he said, if the foreign exchange reserves decrease with the increasing CAD, it is the cause of concern. In case of Pakistan, the foreign exchange reserves have been increasing.

Published in Dawn, August 12th, 2021