IMF Deal to Help Address Inflation, External Debt Issues: SBP Governor

State Bank of Pakistan (SBP) Governor Jameel Ahmad Tuesday said that the staff-level agreement between the International Monetary Fund (IMF) and Pakistan will address the country’s inflationary and external debt issues.

Speaking to State television, the governor said that as a result of the IMF deal, the country will see stability in markets and will also have a positive impact on the foreign exchange reserves.

Commenting on rumors of default, the governor said that such reports were unfortunate and added that there were no circumstances under which Pakistan would have defaulted.

Ahmad highlighted that the country made timely payments on all of its external debt obligations and despite making timely payments the foreign exchange reserves held by the central bank stayed around the $4 billion mark.

Commenting on the exchange rate, the governor said that the central bank has a stated policy in this regard, under which market forces determine the exchange rate. On the appreciation of the Pakistani Rupee, he said that the sentiment has improved after flows from remittances and export proceeds have risen and added that he hopes that the trend continues.

Commenting on the foreign exchange reserves, the governor said that he expects the reserves to increase in the coming weeks as inflows are expected. He said that the increase in reserves would enhance the country’s debt payment capacity.

Inflation target

Separately, speaking at the inauguration ceremony of the Rs. 75 banknote, the governor said that the medium-term inflation target will be 5 percent to 7 percent, and stressed that efforts are being made to bring the headline figure to this range in the next two years.

“The SBP’s key goal is price stability, which is our primary responsibility. At present, the medium-term target has been set at 5-7%,” he said.

“We are very confident that in the coming two years, the SBP would be able to lower inflation to the 5-7% range. This is a big challenge. Right now, when we tell people this, they end up laughing. But I assure you that we can achieve this,” he added.

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