Pakistan central bank criticises Shehbaz Sharif government's policy of prioritising growth over price, financial stability

In the report on ‘State of the Economy for the fiscal year FY22’, the SBP estimates that growth in FY23 would be lower than the low range set for the year. The growth rate will remain lower than 3-4%.

Pakistan’s central bank has criticised the cash-strapped Shehbaz Sharif government for prioritising growth at the expense of price and financial stability.

The State Bank of Pakistan (SBP) in its annual report issued recently said international experience has repeatedly shown the countries that prioritise growth at the expense of price and financial stability are not able to sustain growth and face repeated boom-bust cycles, rapid economic growth followed by a financial crisis, the Dawn News reported.

The present government led by Prime Minister Sharif avoided focussing on growth for the fiscal year FY23 with the result that a steep fall in the growth is expected. But, even then it has failed to bring price stability along with financial stability.

In the report on ‘State of the Economy for the fiscal year FY22’, the SBP estimates that growth in FY23 would be lower than the low range set for the year. The growth rate will remain lower than 3-4%.

The sharp fall in growth has already resulted in heavy lay-offs from trade and industrial sectors with another big spell of retrenchments in the pipeline. Textile millers, exporters and importers have been expressing grave concerns over non-opening of Letter of Credits that has crippled the business cycle.

Despite focussing on prices, inflation for the last five months is hovering around 25%, worsening prospects for stability and growth. For trade and industries, it is hard to survive under the priorities that focus more on prices and less on growth.

“International experience has shown that price stability is a necessary condition for sustained growth and development,” underlined the SBP report, adding that countries where price stability is a primary objective tend to have lower inflation, as well as less volatility in both inflation and growth.