Pakistan central bank will no longer finance government deficit

[Kailash Kumar]

Pakistan central bank will no longer finance government deficit

KHURSHID AHMED

March 03, 2020

KARACHI: Pakistan will follow International Monetary Fund (IMF) recommendations and amend a law by which the central bank was printing money to cover government deficits, a top official said on Monday.

“This type of money printing was a cause of inflation in the country. The government is going to amend a relevant SBP act which will enhance the autonomy of the state bank and legally prevent this type of money printing,” State Bank of Pakistan governor Dr. Reza Baqir said during an English Speaking Union event in Karachi.

The central bank’s increased autonomy and stop to its monetization of government debts are in compliance with IMF recommendations under Pakistan’s $6 billion bailout program.

“This will be another institutional reform which will help control the structural inflation,” Baqir said, adding that the practice of deficit financing has not been in place during the current fiscal year and the central bank is “confident inflation will come down.”

The government has faced severe criticism as consumers have been under tough squeeze on their household budgets, with the inflation rate soaring to 14.56 percent in January.

The rate slowed to 12.40 percent in February, according to the Pakistan Bureau of Statistics (FBS), and the central bank expects it to be contained between 11 percent and 12 percent during the current fiscal year.

Last week, the IMF reached a staff-level agreement with Pakistani authorities, clearing the way for the country’s third loan installment of $450 million. Pakistan has so far secured $1.44 billion under the loan program since July 2019.

In another development, the central bank governor said efforts are underway to reduce the country’s reliance on cash by moving toward digital payment systems.

“Two digital payment systems will be launched shortly. One is Asaan Mobile Account, through which cell phone users would be able to open bank accounts, and the second one is Digital Payment Gateway for reducing reliance on cash payments,” Baqir said, adding that the systems will help minimize the cost of printing money and transaction documentation, and will improve financial inclusion in the country by broadening access to banking services.

https://www.arabnews.pk/node/1636076/pakistan

 

[Norwegian]

Pakistan central bank will no longer finance government deficit

KHURSHID AHMED

March 03, 2020

KARACHI: Pakistan will follow International Monetary Fund (IMF) recommendations and amend a law by which the central bank was printing money to cover government deficits, a top official said on Monday.

“This type of money printing was a cause of inflation in the country. The government is going to amend a relevant SBP act which will enhance the autonomy of the state bank and legally prevent this type of money printing,” State Bank of Pakistan governor Dr. Reza Baqir said during an English Speaking Union event in Karachi.

The central bank’s increased autonomy and stop to its monetization of government debts are in compliance with IMF recommendations under Pakistan’s $6 billion bailout program.

“This will be another institutional reform which will help control the structural inflation,” Baqir said, adding that the practice of deficit financing has not been in place during the current fiscal year and the central bank is “confident inflation will come down.”



The government has faced severe criticism as consumers have been under tough squeeze on their household budgets, with the inflation rate soaring to 14.56 percent in January.

The rate slowed to 12.40 percent in February, according to the Pakistan Bureau of Statistics (FBS), and the central bank expects it to be contained between 11 percent and 12 percent during the current fiscal year.

Last week, the IMF reached a staff-level agreement with Pakistani authorities, clearing the way for the country’s third loan installment of $450 million. Pakistan has so far secured $1.44 billion under the loan program since July 2019.

In another development, the central bank governor said efforts are underway to reduce the country’s reliance on cash by moving toward digital payment systems.

“Two digital payment systems will be launched shortly. One is Asaan Mobile Account, through which cell phone users would be able to open bank accounts, and the second one is Digital Payment Gateway for reducing reliance on cash payments,” Baqir said, adding that the systems will help minimize the cost of printing money and transaction documentation, and will improve financial inclusion in the country by broadening access to banking services.

https://www.arabnews.pk/node/1636076/pakistan

Best economic news of many decades
@Nilgiri @ziaulislam @blueazure @BHarwana

 

[fitpOsitive]

Best economic news of many decades
@Nilgiri @ziaulislam @blueazure @BHarwana

A sure formula for Balkanization.

 

[Nilgiri]

A good step in current situation, esp of severe institutional+legislative structural compromise in Pakistan of variety many members over the years have exposed here on forum.

This kind of step though this will likely create problems too (far downstream) in institutional development but that is another story.

Why did it need the IMF to intervene to pressure this change? This is fairly common sense reform to be done long ago for esp consumption reliant economy.

This is one of the "underlying" kind of problems that I was referring to here:

This indicates a deeper problem

Best economic news of many decades
@Nilgiri @ziaulislam @blueazure @BHarwana

I was just typing the reply as you tagged me heh. Yes its good step...but let us see implementation too. This will help add good pressure to pakistan legislature (and donors/controllers/oligarchs and other status quo benefactors) which had this simple easy route to abuse liquidity. I would be of impression that legislature and related govt organs are more institutionally inept compared to PSB...so it is case of more fair pressure accumulation to effect better change there (in former) by harnessing better professionalism (one would think/hope) of the latter.

 

[American Pakistani]

A sure formula for Balkanization.

So you want to keep borrowing without earning and want someone to keep printing money for you.

No offense but people like you are never happy. You want the govt to fail just because you have some personal grudge against it.

Tbh I'm happy from govt implementing imf and FATF conditions. A blessing in disguise.

 

[Nilgiri]

@Jungibaaz @Socra @Chak Bamu @AgNoStiC MuSliM @jaibi et al I am tagging to also see what they have to say.

 

[fitpOsitive]

So you want to keep borrowing without earning and want someone to keep printing money for you.

No offense but people like you are never happy. You want the govt to fail just because you have some personal grudge against it.

Tbh I'm happy from govt implementing imf and FATF conditions. A blessing in disguise.

Question is : who will earn that money. If you have answer for that, then it's OK, if not then do some research. You will know what I am saying.

 

[ziaulislam]

Best economic news of many decades
@Nilgiri @ziaulislam @blueazure @BHarwana

Lets change the title.
Sbp will no longer print bogus notes.

However, key will be what will happen IMF is no longer checking

 

[Norwegian]

A sure formula for Balkanization.

A sure formula for pmln donkey drug

So you want to keep borrowing without earning and want someone to keep printing money for you.

No offense but people like you are never happy. You want the govt to fail just because you have some personal grudge against it.

Tbh I'm happy from govt implementing imf and FATF conditions. A blessing in disguise.

People like him would love to see their country go bankrupt as long the poor have subsidy on everything

 

[Nilgiri]

Question is : who will earn that money. If you have answer for that, then it's OK, if not then do some research. You will know what I am saying.

Uncle you need to have some internal competition/debate among govt otherwise it become too easy for corrupt forces.

This way if say PM/cabinet appoints technocrats in PSB to effect an iterative reform/change formula...they wont be run-over (in the end) by govt legislature cronies regardless....that are acting on base corrupt instincts that package more same ole same ole nefariously or even blatantly.

Pakistan and developing countries in general must have focused commitment to institutional (i.e beyond politics) competition and development. Pit govt structures against themselves to produce better results for the people (since people get more bargaining power that way since there is less rigged cartel monolith at top).

The monolith colonial heritage structures (designed to extract through oligarchy and big stick dynamic purely) need to see complete erosion and ending. It is best to do this peacefully rather than the violent way later.

 

[American Pakistani]

Question is : who will earn that money. If you have answer for that, then it's OK, if not then do some research. You will know what I am saying.

The 220 millions who love imported maal and want govt to subsidize it. Learn from Bangladesh, how they are supporting their industries. While our shameless love to pick things out of nothing from local produce.

 

[Norwegian]

Question is : who will earn that money. If you have answer for that, then it's OK, if not then do some research. You will know what I am saying.

When there is no state Bank money printing to finance govt deficits, govts would then behave responsibly instead of pushing the debt can down the road

The 220 millions who love imported maal and want govt to subsidize it. Learn from Bangladesh, how they are supporting their industries. While our shameless love to pick things out of nothing from local produce.

Pakistanis are such a shameless nation. They hate their own produce and products but feel no shame in borrowing money from aboard to buy foreign made produce and products. And then wonder why they are financially and morally bankrupt.

 

[American Pakistani]

When there is no state Bank money printing to finance govt deficits, govts would then behave responsibly instead of pushing the debt can down the road


Pakistanis are such a shameless nation. They hate their own produce and products but feel no shame in borrowing money from aboard to buy foreign made produce and products. And then wonder why they are financially and morally bankrupt.

Pakistanis living in Pakistan are exporting even less than what the few million NRP Pakistanis are sending as remits. While imports are more than double.

 

[fitpOsitive]

The 220 millions who love imported maal and want govt to subsidize it. Learn from Bangladesh, how they are supporting their industries. While our shameless love to pick things out of nothing from local produce.

First of all, you know nothing about BD growth.
Secondly, you know nothing about Pakistanis.
Thirdly, consumer in Pakistan is already stretched beyond what they can bear. Einsteins in Imrans cabinet will try to further already stretched people. And then, the mistrust which Pakistanis already have on each other will show its effects.
Whether Imran is going home or not, but if these policies continued then I am seeing people of Pakistan killing each other on the roads of Pakistan.

 

[Sine Nomine]

A sure formula for Balkanization.

How?