State Bank of Pakistan’s Dada Pota policy announcement

SBP GOVERNOR`S RECENT MONETARY POLICY
By Dr Ali Akbar Dhakan, Karachi, Sindh
On 20th April 2009, a quarterly monetary policy was announced in a press conference by the Governor SBP sitting at his both sides Advisers looking like his grandsons in age emerging as a Dada Pota policy announcement.The main factor from their presentation was that Governor himself and his two advisers were non central bankers and outsiders, the adviser with a beard joined SBP direct but some how he has worked a lot being a central banker and a local man since about 15 years to whom no chance was given to explain any complexive point before the audience.The Governor looked over-aged about more than seventy years old and also physically so weak, even his throat did not allow him to read the written statement in clear, vocal and clean voice. How, has he been appointed as Governor State Bank of Paksitan for which according to amended SBP 1956 act, the age limit has been prescribed as 65 years.

He might be one of those who have only furnished an affidevit mentioning their age, qualification and other details at their own discretion .This point is required to be probed by the supereme Court of Pakistan which has only remained the source of Justice in paksitan.Now we may take points of monetary policy by which economic objectives like growth rate, inflation, employment etc are to be obtained .In order to control the inflation, intrest rates are re-shuffled.Last time, during the tenure of the former SBP Governor, in the month of Nov 2008, discount rate was raised gradually from 10 to 15 percent on the advance pressure of IMF with the result that we got a devaluation of our Rupee of about 35 percent from Rs. 60 a dollar to Rs 80 a dollar which is still persistently increasing day by day. Due to this investors shifted their money from investment on account of the increase in the cost of production to purchase of Dollars in the market. Because of the increase in the demand of Dollars, capital flight from Pakistan to other foreign countries occured.This devaluation increased our bill of Balance of payments and our economy faced a great deficit in the BOP or trade deficit in our current Account.In this way, this devaluation fueled in the price hike of imported items and thus doubled the rate of inflation or CPI in the market from 15 to 35 percent with in the period of three months. Now the discount rate of loans for only 3 days has been lowered by 1 percent from 15 to 14 percent and has been compared with the estimated inflation rate of 14 percent for 12 months which has no negative effect on the cost of production and discouragement of investors to invests\ in the country due to the lower rate of margin of profit for the investors.It seems that the announced decrease in the discount rate will never bring any change rather the persistent increase in the inflation rate, less margin of profit, less investment rate and capital flight will increase devaluation of our currency from Rs.80 to Rs.100 with in the current fiscal year and also increase CPI inflation if proper steps of controlling smuggling, prevalent War-like Conditions non-development expenditure or fiscal deficit and misappropration of funds are not strictly taken which seem impossible and impracticable in the face of international and national upheavels and turmoils in the near future.

By using this service you agree not to post material that is obscene, harassing, defamatory, or otherwise objectionable. Although IAOJ does not monitor comments posted to this site (and has no obligation to), it reserves the right to delete, edit, or move any material that it deems to be in violation of this rule.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s