D-8 cen­tral bankers pledge to un­der­stand eco­nomic is­sues

The Pak Banker - - Front Page - Staff Re­porter LAHORE

Gov­er­nors of State Banks of (D-8) coun­tries have pledged to un­der­stand eco­nomic is­sues con­fronted by them en­hanc­ing co-op­er­a­tion among them­selves to bet­ter com­pre­hend chal­lenges.

A joint com­mu­niqué of D-8 coun­tries is­sued here said, “We Gov­er­nors of Cen­tral Banks of De­vel­op­ing Eight (D-8) Coun­tries, held our sec­ond meet­ing in Is­lam­abad, Pak­istan on Wed­nes­day with Yaseen An­war, Gover­nor of the State Bank of Pak­istan in the chair to achieve the ob­jec­tives of in­creas­ing our mu­tual un­der­stand­ing of var­i­ous eco­nomic and fi­nan­cial sec­tor re­lated chal­lenges fac­ing us, and en­hanc­ing co-op­er­a­tion among our­selves to con­front these chal­lenges”.

They said that since they last met in Abuja, Nige­ria in July 2010, the global econ­omy con­tin­ues to face a num­ber of chal­lenges. Ex­ter­nal, fis­cal and fi­nan­cial im­bal­ances still per­sist, cre­at­ing chal­lenges on eco­nomic growth and em­ploy- ment. Global growth is pro­jected to drop in 2012 be­cause of weak eco­nomic ac­tiv­ity in the US and de­te­ri­o­rat­ing sov­er­eign and bank­ing sec­tor developments in the euro area. As a re­sult, real GDP growth in the emerg­ing and de­vel­op­ing economies is go­ing to fur­ther slow­down.

“Al­though the im­pacts and re­lated chal­lenges may be dif­fer­ent from coun­try to coun­try, and re­gion to re­gion, we are all united in our re­solve to achieve sus­tain­able and in­clu­sive growth in a col­lab­o­ra­tive way,” they said.

“Specif­i­cally, we will for­mu­late mone­tary and fi­nan­cial poli­cies to sup­port sus­tain­able growth strat­egy in D-8 coun­tries in the back­drop of an un­cer­tain out­look for the global econ­omy, pro­mote In­no­va­tive Fi­nan­cial In­clu­sion Poli­cies, ex­plore op­por­tu­ni­ties in Is­lamic Fi­nance and es­tab­lish in­for­ma­tion ex­change and pro­mote peer learn­ing amongst D-8 cen­tral banks,” they said.

They said we must work to­gether to for­mu­late mone­tary and fi­nan­cial poli­cies to sup­port sus­tain­able growth strat­egy for D-8 coun­tries in the back­drop of an un­cer­tain out­look for the global econ­omy. The D-8 economies face a di­verse set of eco­nomic chal­lenges. Some of these are struc­tural; oth­ers may be cycli­cal in na­ture, while oth­ers a di­rect con­se­quence of the global credit crunch of 2007-08 and the re­cent Euro area crises. How­ever, in for­mu­lat­ing a growth strat­egy to deal with these is­sues – and to iden­tify ar­eas of po­ten­tial co­op­er­a­tion be­tween mem­bers – it is nec­es­sary to un­der­stand these chal­lenges bet­ter. In or­der to achieve this, we have agreed to col­lab­o­rate and fo­cus on de­vel­op­ing and us­ing mone­tary and fi­nan­cial pol­icy tools that can buf­fer the do­mes­tic econ­omy against the global slow­down by strik­ing a bal­ance be­tween nur­tur­ing sus­tain­able do­mes­tic de­mand and an ex­port-led growth model.

Re­duce de­pen­dency on de­mand from tra­di­tional trade part­ners by re­bal­anc­ing and di­ver­si­fy­ing the sources of eco­nomic growth in the do­mes­tic economies by fo­cus­ing on op­por­tu­ni­ties for greater co­op­er­a­tion amongst re­gional blocs, such as the D-8. Es­tab­lish cor­re­spon­dent bank­ing re­la­tion­ship and cur­rency swap ar­range­ments amongst D-8 coun­tries to pro­mote trade and cap­i­tal flows.

The need to bring the in­for­mal sec­tor into the main­stream econ­omy, and hence into the tax net, by im­prov­ing the ef­fi­ciency of pub­lic in­sti­tu­tions, in or­der to in­crease fis­cal space and the ef­fec­tive­ness of mone­tary man­age­ment pro­cesses.

De­vel­op­ing the means (such as joint re­search projects and pro­fes­sional ex­changes be­tween the mem­ber coun­tries for ca­pac­ity-build­ing) to bet­ter un­der­stand, and learn from mem­ber coun­tries’ ex­pe­ri­ences, on the ef­forts un­der­taken to tackle chal­lenges that are com­mon to the D-8 e.g. en­forc­ing bet­ter fis­cal dis­ci­pline; pro­mot­ing in­vest­ment in in­fra­struc­ture; im­ple­men­ta­tion of cap­i­tal stan­dards; in­cen­tiviz­ing banks to lend to the real sec­tor and sus­tain­ing low and mod­er­ate lev­els of in­fla­tion and con­tribut­ing to fi­nan­cial sta­bil­ity.

Fi­nan­cial in­clu­sion will re­main a top pri­or­ity as it al­le­vi­ates fi­nan­cial con­straints on poor and low in­come house­holds, helps them to ben­e­fit from bet­ter eco­nomic op­por­tu­ni­ties, and cre­ates em­ploy­ment. We also note the ef­fec­tive­ness of ex­ist­ing pol­icy frame­works and in­sti­tu­tions and progress made on var­i­ous in­no­va­tive new ap­proaches to fi­nan­cial in­clu­sion.

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