Central bank's governor says Pakistan eyeing current account deficit of 2-3% of GDP this year

"The SBP in its last monetary policy statement had said that it is looking at a current account deficit (CAD) of 2-3% of the GDP which roughly translates to $6.5-9.5 billion," he said while speaking at a press conference. 

Baqir said though a lot of people expressed concern and asked whether that was a sustainable level, but "in our assessment, it's a sustainable level of current account deficit".

The international experience, he said, showed there were three alarm bells that "caused concern" involving CAD. But not even one of those alarm bells were ringing in Pakistan's case, he added.

"We faced difficulty in the past when our CAD reached 6pc of GDP and after that, our reserves losses were so great that we had to go to the IMF."

Accoridng to the central bank's chief, the first alarm bell was when the CAD was increasing very fast, while the second alarm bell was if the exchange rate was not adjusting to the CAD.

"It is a natural phenomenon that if your outflows are more, imports are rising and exports are not increasing, then the exchange rate should adjust. If the exchange rate in a market-based country is showing a good two-way adjustment as in the case with Pakistan, then it is a positive indicator."

The third alarm bell was a massive decrease in reserves, he added. The opposite was happening in Pakistan, however, the SBP governor added.

About IMF releasing $2.77 for Pakistan on August 23 out of a total of $650 billion for various countries, the central bank's governor said receiving the funds will also increase net international reserves. "This is good to cover import costs," he said. 

Baqir said about two years ago Pakistan's economy was in recession mode but now it had come out of the stabilisation phase and entered the growth phase.

He said about three months ago, Pakistan's GDP growth rate was forecast at 2% but then it witnessed a growth of 4% in the previous year while in the current year, according to SBP's estimation, it would grow by 4-5%.

He said the country's economy had witnessed "a complete turnaround".

Baqir told a questionnare that after the COVID-19 outbreak, the average global debt to GDP jumped by around 10 pe rcent, however Pakistan's debt to GDP ratio remained in control and increased marginally.

He said Pakistan's Ehsaas programme is recognised as the world's third or fourth largest cash programme.