State Bank of Pakistan emphasizes the country's challenges in tackling inflation, current account deficit

State Bank of Pakistan (SBP) governor Dr. Reza Baqir, on Thursday, emphasized controlling inflation and current account deficit as economic growth may slow down to 4.5 percent.

Also, International Monetary Fund (IMF) warned of elevated risks to Pakistan's economy from the growing current account deficit that it projected would widen to 4 percent of gross domestic product (GDP) in the current fiscal year, as reported by Express Tribune.

State Bank of Pakistan's governor delivered a speech on the economic outlook of Pakistan at the Swiss embassy in Islamabad.

The event was hosted by Swiss Ambassador Benedict de Cerjat and was attended by the British high commissioner and European Union ambassador along with representatives of Swiss companies working in Pakistan.

Baqir hoped that against USD 19 billion in current account deficit in 2018, the gap would be lower in the ongoing fiscal year and while showing a slide put the deficit below USD 15 billion.

"We are trying our best to contain the current account deficit through exchange rate and interest rate policies and hope that we will weather it much better than before," said Baqir.

"The current account deficit is primarily driven by commodity prices as the non-oil balance is projected to remain in surplus in response to the coordinated monetary and fiscal policies," he added.

Meanwhile, Pakistan's inflation is projected to remain in double digits by the year-end, as projected by IMF.

The IMF has projected 10.2 percent inflation by the end of the current fiscal year.

Terming inflation was another problem for Pakistan, the governor blamed global commodity prices for the upsurge. The rise in inflation following the commodity price hike has been broadly in line with that in other countries, he added.

The governor said that the transformation towards treasury single account should be done fast.

Also, in the midst of the higher current account deficit, the IMF has placed a requirement to increase the gross official foreign exchange reserves to USD 21.2 billion by June 30 this year addition to USD 5.5 billion in just five months.

The governor in his speech also said that the transformation towards treasury single account should be done fast in Pakistan.

Under the IMF deal, the government has committed to close all government entities' accounts in commercial banks and transfer cash to the central bank, including the accounts maintained by armed forces, as noted by Express Tribune.