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Institute for Policy Reforms objects SBP’s Monetary Policy Statement


LAHORE: Institute of Policy Reforms (IPR) released a ‘Fact Sheet’ against Monetary Policy Statement (MPS) of State Bank of Pakistan for March that was released by SBP on March 21, 2015. According to IPR, SBP’s MPS gives too optimistic picture of  the national economy.


According to IPR, MPS totally fails in enlightening the economic problems, which will arise in the next months to hinder economic performance. IPR advices SBP that being an autonomous institution, SBP should take notice of these problems as well.

The objection raised by IPR was on inflation, growth, deficit financing, and government borrowings.

MPS states that the inflation has come down from 8.2% in June 2014 to 3.2% in Feb 2015. IPR commented that it is due to decline in international oil prices. There were nothing special measurements by the government to curb the inflation. Moreover, the oil prices in international markets has again started to increase and in a few months, inflation will rise again.


Another objection by IPR was on government borrowings from commercial banks in Fiscal Year 2015, which led to a ‘crowding out’ of credit to the private sector. In previous year, commodity financing was Rs. 133 billion and at present it is Rs. 55 billion that is answerable too. Despite subsidy on wheat, target of exporting wheat was not achieved because of decline in price in international market.

The MPS shows the decline in the current account deficit in the first eight months of 2014-15. However, IPR states that as the exports for the period was low and same has been compensated by the home remittances, contraction in imports, large CSF payment, Ijara-Sukuk bond flotation and aid from IMF. That’s why current account deficit falls. There is no contribution by government in this regard as well.

IPR praises government on one matter, that was restricting the fiscal deficit to 2.2% of the GDP in the first half of 2014-15. By limiting the expenditures, government was able to do this. According to IPR estimation, fiscal deficit in the first eight month has jumped to 3.7% of the GDP. There are chances that the deficit will exceed 4.9 % of GDP in 2014-15.

In last, the rupee value has arisen with respect to Euro. Can Pakistan retain its competitiveness in the Europe, despite the presence of GSP + status ? The SBP must explain its exchange rate policy as well.

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