Stimulus for market to continue amid Covid uncertainties: SBP chief

The State Bank of Pakistan Governor Reza Baqir has said that the Monetary Policy Committee kept the interest rates unchanged to continue the stimulus for the market amid uncertainties due to Covid-19.

In an interview to a foreign newspaper on Tuesday, the central bank chief said the committee, which kept benchmark interest rate unchanged for a fifth straight meeting, noted the real interest rates that range from zero to negative four percent and that the factors that have hiked the headline inflation are food and fuel products alone and thus only one-off. “It is more dangerous to withdraw stimulus too soon than too late,” Baqir said of the mutating virus situation that he says ravaged emerging markets.

When asked if the government needs to do more for the central bank in terms of fiscal side help and how that would be assisted ideally by, he said Pakistan’s Ehsas Emergency Cash Transfer Programme has been recognized globally and it ranked amongst the top world programmes in terms of number of people and share of populations both. He also said the cash transfer program was one of the three strategies by the government, adding that one of the three was also to keep infection spread under control with only 12 new people Covid-hit for every million of the population in just yesterday’s data. It is much lower than “the global average of 62 per million”.

He said the third step to counteract the pandemic rage was the economic stimulus program extended by the central bank that equaled about 5 pc of the country’s GDP.

On the inflation for the fourth fiscal quarter or the year-end, he said the idea is that it will end about 9 percent which is the higher end of the range (7-9) earlier predicted. “It is just a handful of commodities or CPI [consumer price index] groups pertaining to food and energy.”

“While it's a one-off, we are prepared to take any action if there are signs of demand pressure,” the SBP head said of the measures for the outlook, adding that at present, however, there is no pressure.