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China’s Economic Recovery: A Mere Façade

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It would not be too far from the truth to say that China is not all that it says it is. Many of its military and diplomatic actions have gone against norms and messages propagated by its own government. Retracting its own statements and even concealing the truth comes naturally to a government that maintains a monopoly over all information in circulation within the country as well as that which leaves it. Recent statements from the Chinese government have painted a colorful picture for the coming months, with it soon to “regain the economic growth it lost” and maintain its internal strength. How much truth can actually be accorded to such a statement though? Is China’s economy truly in a good shape or is such a statement to be seen as a mere façade, shadowing a highly unstable country?

If recent trends emanating from the country were to be analyzed, one could indeed point to the latter. At the beginning of the year, China’s economic growth had already begun a steady decline, falling to its lowest in 27 years, a mere 6 percent in the 3rd quarter of 2019. Predictions during the time, from both within and outside, projected the growth rate to fall further, with an economist at the Chinese Academy of Social Sciences predicting a drop below the annualized 5 percent. Additionally, reports questioning the accuracy of the data released by China have also emerged. China’s national accounts are based on data collected by local governments who are rewarded for meeting growth and investment targets. In this regard, it has become apparent through outside observation as well as internal admittance that many of China’s provinces have had an incentive to skew local statistics, some by nearly 20% a few years ago.

Such manipulation of data can have serious ramifications on the calculation of national data, especially since China’s GDP is based on input data rather than real performance. It is also to be noted that in addition to local governments manipulating data, there is a discrepancy between underlying economic activity and GDP figures, which has allowed the government to ignore bad investments and project only the figures it approves off. Based on such an understanding of the Chinese economy, reports from 2019 show that both GDP as well as GDP growth in China are far below official predictions and statements. It must also be understood that the Chinese government itself has always had an incentive to project greater growth during its developing years. Claiming higher growth rates and lying about recessions has allowed China to retain or even increase investment. With that being said, it has become increasingly evident that the statistics and figures released by China cannot be wholly relied upon.

While the above highlights the concealing factor behind China’s economy, it also points to the possibility that China’s economy is currently in a bad state. With the shuttering of businesses across the country, it is evident that the Covid-19 crisis dealt a devastating blow to China’s already floundering economy. Reports published by China’s National Bureau of Statistics in April showed that the country’s GDP had fallen by 6.8 percent, a contraction the likes of which, China has not seen since at least 1992. However, with lockdown measures now ending and policymakers stepping up stimulus to combat the massive economic shock, the country is now set to return to a modest growth rate according to its government. This may be true as China has begun on a path of recovery, however, its economy may have to face another looming crisis soon.

Over the past few months, it has become increasingly evident that not only is foreign investment fleeing the country but there is increasing unrest among local investors as well. China’s economic downturn which began with the trade war and culminated in the COVID-19 economic crisis has frightened investors across China. Since the beginning of the trade war with the US, many international companies have begun shuttering business and departing from the country. The pandemic has seen that number only increase over the past few months with potentially disastrous economic outcomes. Additionally, fears within China have surfaced as well, with many attempting to send their capital abroad. The recent political turmoil now plaguing Hong Kong is also reviving fears over massive capital outflows from the country. China’s new national security bill and the retaliation promised by the US and others has stoked significant concerns. The first instance of this is seen in the immediate aftermath of China’s announcement of the Bill on May 22 when Hong Kong’s benchmark for local stocks plunged by 6.9%. Essentially, with tensions rising, further turmoil and capital flight may soon be in the cards.

Only time will tell whether the government will be able to reduce the possibly disastrous consequences of such capital flight or even reverse the same. In 2015, when similar fears of capital flight occurred, it spurred the country to spend nearly US$1 trillion of its reserves. However, with the current economic downturn in China, it would be highly unlikely that the Chinese government will be able to muster the funds needed in countering such consequences. The Chinese government has seemingly taken cognizance of this fact though and has therefore introduced measures aimed at ensuring Chinese investment and capital remains within China. Not only has China already put a cap on the amount of money allowed to leave the country but also cracked down severely on its underground banking system. Additionally, the government has been attempting to woo the fleeing investors back with promises of economic stability and recovery. China’s current projection of post-pandemic recovery and growth must therefore be viewed through a critical lens, and seen as merely a tool through which it attempts to influence and reassure investors.

On the government’s attempts at ensuring investment though, it has not merely acted in the field of rhetoric and promises though. Since the beginning of last year, the Chinese government has put a cap on the maximum amount allowed for withdrawal from its economy. According to new rules, individuals will only be allowed to withdraw a maximum of the equivalent of around $15,000 and carry transactions up to only $50,000 abroad in a year. Any Chinese citizen found to be withdrawing in excess of that amount will be barred from making any withdrawals for two consecutive years. Additionally, any Chinese citizen leaving China with an excess of RMB 20,000 in cash require a permit issued by the bank that provided the same. In enforcement, the State Administration of Foreign Exchange (SAFE) has already begun its crack down on capital flight. In November of last year, the agency fined Chinabank Payments $4.2 million for moving money overseas. In the following month, SAFE fined the Bank of China $6,000 for breaking a government rule and allowing a customer to withdraw over $50,000 in cash according to reports. One can be sure that the situation in China is indeed serious, when its government has become overly concerned over a mere $15,000 being withdrawn from the economy.

This concern has also been extended to the new surge in China’s underground banking system. China, in its efforts to counter threats to its economy, has begun a serious crack down on all capital outflows, whether legal or illegal. The Supreme People’s Court recently introduced stiff penalties for any and all illegal currency exchanges. According to new rulings, the government will introduce jail terms of five years or more for those operating ‘underground banks’, which currently facilitate illegal foreign exchange and cross border trading. Through this process, the Chinese government has effectively sought to stop tens of thousands of Chinese from funneling millions out of the country through these services. Since the government has put a cap on the amount of money being withdrawn from the country, people have sought other mechanisms through which they can transfer funds overseas, either for the purpose of investing in property or making other significant foreign exchanges.

The requirement for such mechanisms has motivated the creation of an Informal Value Transfer System (IVTS) known as ‘Underground Banking’. The IVTS involves the transfer of funds to a bank account controlled by a Chinese IVTS provider who then transfers the same into an account of the remitter’s choice. This allows for the transfer of large amounts of funds out of the country without the knowledge of the Chinese government. The stiff penalties now being imposed on such transfers are once again indicative of the governments need to retain capital within its own economy. Any large capital outflow can result in a fall in exchange rates, negative spiral of declining confidence and finally, no buffer for government debt. For a country currently facing a debt to GDP ratio of nearly 300%, capital outflows could result in serious consequences for its economy, especially during a time when mechanisms like the IVTS has seemingly gone into overdrive.

The government is currently doing everything within its power to paint a picture of recovery, provide opportunities for investment and crack down on individuals attempting to evade its rules and directives. While the crackdown on capital outflows and underground banking is evident, there has also been significant actions taken on the digital currency front. Within China, there has been a surge in both the transaction as well as mining of Bitcoins over the past few years. Many experts have stated the need for three factors in ensuring effective cryptocurrency mining, i.e. low-cost electricity, colder weather and reliable internet. The availability of all these factors in China has facilitated massive incursions into the usage of cryptocurrencies, with reports showing between 35-37 variants of the same currently available in the country.

With the property market currently being viewed as inflated and the stock market as a scam, cryptocurrencies provide an alternative to Chinese citizens who wish to make investments that are not riddled with problems or subject to government scrutiny. Many middle- and upper-class Chinese have thus begun making investments and transactions through Bitcoins and other cryptocurrencies. With the government being unable to shutdown Bitcoin accounts or monitor transactions made through the same, this mechanism effectively allows individuals to subvert it. It is estimated that this medium alone has accounted for transactions ranging in billions of dollars over the past few years. With the Renminbi (RMB) essentially losing its transactional value, the number of people now adopting these mechanisms has seen a significant increase, putting the government on alert. However, the only action the government can undertake in this regard, is accelerate the launch of its own sovereign digital currency and hope its citizens will give up on Bitcoins and other cryptocurrencies (a highly unlikely prospect).

It is evident that the government in China may soon have an economic crisis on its hands, one which it may be unable to counter. Extremely high debt to GDP rates and possibly massive capital outflows has put the government in a precarious position. It has therefore sought to curb high debt and also put out reports that its digital currency would be a game changer for Asia, allowing for more RMB demand in the region. Undoubtedly these reports are another one of its propaganda activities, aimed at retaining investment. According to reports, China’s economy will face two major shocks, a pandemic stimulus and a post-pandemic economic fallout.

It must also be noted that China depends on the global economy for its own recovery and if this does not occur soon enough, its economy will have to face serious consequences. The reasons for this are manifold. Most importantly, China, the world’s largest exporter, relies on the United States, Japan, South Korea and others for its economic activity. Exports to the US, are currently facing a shortage of demand as well as disruptions across global supply chains. Additionally, China needs to ensure continued implementation of its Belt and Road Initiative in order to continue a majority of its overseas economic activity. Currently, from Europe to Asia, trade as well as infrastructural projects across the BRI, which accounts for around 17 percent of China’s exports, have been put on hold.

It has therefore become apparent that China’s economic growth is not all that it would seem. While it is the second largest economy in the world and has shown spectacular growth in the past, it would seem like China’s glory days are behind it. Forces that once drove China’s economic growth are now withering. China’s economy can no longer rely on a trade surplus or foreign investment to boost growth and will probably see increased capital outflows in the coming months. Additionally, China is now on the verge of a debt crisis and the massive foreign reserves it has repeatedly used as stimulus in the past have been slowly declining. In this context, it is imperative to question the narratives propagated by the Chinese government. If the Chinese economy is truly on the path of economic recovery, then why has there been an increase in the lack of confidence shared by its own civilians? And if such are the woes facing the country, is the future of its’s economy truly as promising as it’s government would have the world believe? One would think not.

Zeus Hans Mendez is a Research Associate and Centre Coordinator at the Centre for Security Studies (CSS), Jindal School of International Affairs, O.P. Jindal Global Univeristy. He is also a Research Assistant at the Centre for Security and Strategy Studies (CeSCube).

Economy

The Politico-Economic Crisis of Lebanon

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Dubbed as a failed state. The Middle Eastern country, also known as the ‘Lebanese Republic’, is already leading towards a humanitarian crisis. The country is witnessing the worst financial crisis since the 1975-90 civil war. The financial catastrophe has done most of the damage as the country currently stands as one of the top 10 worst economic disasters witnessed over the past 150 years. If the economists are put true to their word, it means that Lebanon rates as the most dismal economic crash since the 19th century. As the state of Lebanon undergoes a significant political shift since last year, the social and economic fissures are subsequently broadening. A fragile democracy (for namesake) and a constant disequilibrium in the parliamentary stratosphere, have led to an economic depression that is rapidly expanding as the country fails to adopt a unified political stance and adhere to corrective measures to hold the toppling economy from a collapse.

More than half of the Lebanese population has slumped below the poverty line as escalating inflation continues to reel the populace. The main cause underpinning such brutal inflation is the hyper-devaluation of the Lebanese pound. The currency was originally pegged at a fixed rate of 1500 Lebanese pounds to the US dollar. However, over the past three decades, the economic crunch has crippled the economic nucleus of Lebanon. According to World Bank estimates, the Lebanese pound has devalued by 95% and currently trades at 22000 Lebanese pounds to the US dollar in the black market – roughly 15 times above the official rate. The resultant inflation has driven the government to push the prices to unfathomable levels – even pushing necessities beyond the reach of an average citizen. The fact could be witnessed by the rapid increase in the price of bread – which was hiked by another 5% last month to value at 4000 Lebanese pounds per loaf.

The dire social crisis could be gauged by the fact that an average Lebanese family requires a spending worth five times the minimum wage mandated by the government just to afford basic food requirements. Most of the families can’t suffice to consume utilities such as medicine, gas, or electricity. Astounding research revealed that even hospitals dealing with the Covid outbreak are not afforded gas and electricity which has led to a hike in petroleum consumption due to heavy usage of generators. The resulting shortage of petroleum has driven rage across the country as businesses fail to thrive while multiple wings of the airports are rendered powerless. The recent World Bank report signified that the food prices have inflated by roughly 700% over the past two years – a swell of 50% in just under a month. The regional countries have shown concern as Lebanon is heading towards a health crisis with a strengthening Delta variant in the Middle East and no room for recovery.

The main cause of such a debilitating situation is primarily the rampant corruption in the echelons of the government followed by the instability that ensued last year. Following the catastrophic blast in Beirut’s port that claimed an estimated 200 lives, the government resigned in the aftermath of virulent protests across Lebanon. The political vacuum, however, further pushed the state into despair. The caretaker government, led by the former Prime Minister, Saad Hariri, failed to consolidate a government as ideological differences between the President and the Prime Minister continued to displace the essential debates of the country. The contention between President Michel Aon, a stout supporter of the Shite militant group Hezbollah, and Prime Minister Saad al-Hariri, a Sunni Centrist, caused the efforts to falter as the country continued to plunge into crisis without an elected government to handle the office.

Hariri drove the narrative that due to President’s strong ties with the Hezbollah, which is arguably supported by Iran, Lebanon has suffered a shuffle of power to entrust financial support to the militant group. The narrative caused institutions like IMF and the World Bank to hesitate in injecting desperately needed social stimulus into the country despite continual warnings of an impending humanitarian crisis by France and the United States. A political vacuum coupled with the destruction caused last year along with the prudence of global financial institutions to pivot the country have ultimately resulted in the chaos that describes the landscape of Lebanon today.

However, Hariri resigned last month after failing to form a government even after nine months. The resulting political thaw helped President Aon to appoint Najib Mikati, a lucrative businessman, and former prime minister, as an interim Prime Minister entrusted to form a mandated government in Lebanon.

With a renewed Cabinet support, something that Hariri rarely enjoyed, Mikati is expected to assuage the concerns of the IMF and support economic reforms with the help of states like France. The Paris conference, scheduled on 4th August, is now the focal point as Mikati plans to convince the French diplomats regarding his schemes to pull Lebanon out of the puddle. Prime Minister Mikati recently reflected on his aspirations: “I come from the world of business and finance and I will have a say in all finance-related decisions”. He further stated: “I don’t have a magic wand and can’t perform miracles … but I have studied the situation for a while and have international guarantees”. It is clear that Mikati envisages repairing the economy which is already long overdue.

Under the French plan aiding Mikati’s regime, he would need to enforce significant political reforms to gain international aid. The diplomats, however, envision a far graver reality. It is touted that the IMF would likely focus on two facets before granting any leverage to the Mikati-regime: political-social reforms and progress towards parliamentary elections. However, with grueling Covid cases springing into action, the road to recovery would probably be highly tensile. 

While Mikati doesn’t stem from any particular political bloc unlike his failed predecessors, he was elected primarily by the backing of Hezbollah. A question emerges: would Mikati be able to navigate through the interests of an organization subjected as a terrorist fraction by most of the Western world. An organization that arguably serves as the primary reason why Lebanon stands as one of the highly indebted countries in the world. An organization that could be the decisive factor of whether financial support flows to Lebanon or sanctions cripple the economy further similar to Iran. The question stands: would Mikati refuse the dictation of Hezbollah and what would be the consequences. The situation is highly complex and time is running out. If Mikati fails, much like his predecessors, then not only Lebanon but the proximate region would feel the tremors of a ‘Social Explosion’.

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Bangladesh-Myanmar Economic Ties: Addressing the Next Generation Challenges

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Bangladesh-Myanmar relations have developed through phases of cooperation and conflict. Conflict in this case is not meant in the sense of confrontation, but only in the sense of conflict of interests and resultant diplomatic face-offs. Myanmar is the only other neighbor that Bangladesh has on its border besides India. It is the potential gateway for an alternative land route opening towards China and South-East Asia other than the sea. Historically, these two countries have geographic and cultural linkages. These two bordering countries, located in separate geopolitical regions, have huge possibilities in developing their bilateral economic relations. At the initial phase of their statehood, both countries undertook numerous constructive initiatives to improve their relations. Nevertheless, different bilateral disputes and challenges troubled entire range of cooperation. Subsequent to these challenges, Bangladesh and Myanmar have started negotiation process on key dubious issues. The economic rationales over political tensions in Bangladesh-Myanmar relations prevail with new prospects and opportunities.

Bangladesh-Myanmar relations officially began from 13 January 1972, the date on which Myanmar, as the sixth state, recognized Bangladesh as a sovereign nation. They signed several agreements on trade and business such as general trade agreement in 1973. The two countries later initiated formal trade relations on 05 September 1995. To increase demand for Bangladeshi products in Myanmar, Bangladesh opened trade exhibitions from 1995 to 1996 in Yangon, former capital of Myanmar. However, that pleasant bilateral economic relations did not last for long, rather was soon interrupted mainly by Myanmar’s long term authoritarian rule and isolationist economic policy. In the twenty-first century, Bangladesh-Myanmar relations are expected to move towards greater economic cooperation facilitated by two significant factors. First, the victory of Myanmar’s pro-democratic leader, Aung San Suu Kyi, in 2011 has considerably brought new dimensions in the relations. Although this relation is now at stake since the state power has been taken over by military. Second, the peaceful settlement of Bangladesh-Myanmar maritime dispute in 2012 added new dimension in their economic relations.

Bangladesh and Myanmar don’t share a substantial volume of trade and neither is in the list of largest trading partners. Bangladesh’s total export and import with Myanmar is trifling compared to the total export and import and so do Myanmar’s. But gradually the trades between the countries are increasing and the trend is for the last 5 to 6 year is upward especially for Bangladesh; although Bangladesh is facing a negative trend in Balance of Payment. In 2018-2019 fiscal year, Bangladesh’s total export to Myanmar was $25.11 million which is more than double from that of the export in 2011-12. Bangladesh imported $90.91 million worth goods and services from Myanmar resulting in $65 Million deficit in Balance of Payment in 2018-2019 fiscal year. For the last six or seven years, Bangladesh’s Balance of Payment was continuously in deficit in case of trade with Myanmar. The outbreak of COVID-19, closure of border for eight months and recent coup in Myanmar have a negative impact on the trade between the countries. 

Bangladesh mainly imports livestock, vegetable products including onion, prepared foodstuffs, beverages, tobacco, plastics, raw hides and skin, leather, wood and articles of woods, footwear, textiles and artificial human hair from Myanmar. Recently, due to India’s ban on cattle export, Myanmar has emerged as a new exporter of live animals to Bangladesh especially during the Eid ul-Adha with a cheaper rate than India. On the hand, Bangladesh exports frozen foods, chemicals, leather, agro-products, jute products, knitwear, fish, timber and woven garments to Myanmar.

Unresolved Rohingya crisis, Myanmar’s highly unpredictable political landscape, lack of bilateral connectivity, shadow economy created from illegal activities, distrust created due to different insurgent groups, maritime boundary dispute, illegal drugs and arms smuggling in border areas, skeptic mindset of the people in both fronts and alleged cross border movement of insurgents are acting as stumbling block in bolstering economic relations between Bangladesh and Myanmar.

Bangladesh-Myanmar relations are yet to blossom in full swing. The agreement signed by Sheikh Hasina in 2011 to establish a Joint Commission for Bilateral Cooperation is definitely a proactive step for enhancing trade. People to people contact can be increased for building mutual confidence and trust. Frequent visit by business, civil society, military and civil administration delegates may be organized for better understanding and communication. Both countries may explore economic potential and address common interest for enhancing economic co-operation. In order to augment trade, both countries may ease visa restrictions, deregulate currency restrictions and establish smooth channel of financial transactions. Coastal shipping (especially cargo vessels between Chittagong and Sittwe), air and road connectivity may be developed to inflate trade and tourism. Bangladesh and Myanmar may establish “Point of Contact” to facilitate first-hand information exchange for greater openness. Initiative may be taken to sign Preferential Trade Agreement (PTA) within the ambit of which potential export items from both countries would be allowed to enter duty free. In recent year, Bangladesh was badly affected by many unilateral decisions of India such as onion crisis. Myanmar can serve as an alternative import source of crops and animals for Bangladesh to lessen dependence upon India.

Myanmar’s currency is highly devaluated for a long time due to its political turmoil and sanctions by the west. Myanmar can strengthen its currency value by escalating trade volume with Bangladesh. These two countries can fortify their local economy in boarder areas by establishing border haats. Cooperation between these two countries on “Blue Economy” may be source of strategic advantages mainly by exporting marine goods and service. Last but not the least, the peaceful settlement of maritime boundary disputes between Bangladesh and Myanmar in 2012 may be capitalized to add new dimension in their bilateral economic relations. Both nations can expand trade and investment by utilizing the Memorandum of Understanding on the establishment of a Joint Business Council (JBC) between the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

With the start of a new phase in Bangladesh-Myanmar relations, which has put the bilateral relations on an upswing, it is only natural that both sides should try to give a boost to bilateral trade. Bilateral trade is not challenge free but the issue is far easier to resolve than others. At the same time, closer economic ties could also help in resolving other bilateral disputes. For Myanmar, as it is facing currency devaluation and losing market, increased trade volume will make their economy vibrant. For Bangladesh, it is a good opportunity to use the momentum to minimize trade deficits and reduce dependency on any specific country.

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The Monetary Policy of Pakistan: SBP Maintains the Policy Rate

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The State Bank of Pakistan (SBP) announced its bi-monthly monetary policy yesterday, 27th July 2021. Pakistan’s Central bank retained the benchmark interest rate at 7% after reviewing the national economy in midst of a fourth wave of the coronavirus surging throughout the country. The policy rate is a huge factor that relents the growth and inflationary pressures in an economy. The rate was majorly retained due to the growing consumer and business confidence as the global economy rebounds from the coronavirus. The State Bank had slashed the interest rate by 625 basis points to 7% back in the March-June 2020 in the wake of the covid pandemic wreaking havoc on the struggling industries of Pakistan. In a poll conducted earlier, about 89% of the participants expected this outcome of the session. It was a leap of confidence from the last poll conducted in May when 73% of the participants expected the State Bank to hold the discount rate at this level.

The State Bank Governor, Dr. Raza Baqir, emphasized that the Monetary Policy Committee (MPC) has resorted to holding the 7% discount rate to allow the economy to recover properly. He added that the central bank would not hike the interest rate until the demand shows noticeable growth and becomes sustainable. He echoed the sage economists by reminding them that the State Bank wants to relay a breather to Pakistan’s economy before pushing the brakes. The MPC further asserted that the Real Discount Rate (adjusted for inflation) currently stands at -3% which has significantly cushioned the economy and encouraged smaller industries to grow despite the throes of the pandemic.

Dr. Raza Baqir further went on to discuss the current account deficit staged last month. He added that the 11-month streak of the current account surplus was cut short largely due to the loan payments made in June. The MPC further explained that multiple factors including an impending expiration of the federal budget, concurrent payments due to lenders, and import of vaccines, weighed heavily down on the national exchequer. He further iterated that the State Bank expects a rise in exports along with a sustained recovery in the remittance flow till the end of 2021 to once again upend the current account into surplus. Dr. Raza Baqir assured that the current level of the current account deficit (standing at 3% of the GDP) is stable. The MPC reminded that majority of the developing countries stand with a current account deficit due to growth prospects and import dependency. The claims were backed as Dr. Raza Baqir voiced his optimism regarding the GDP growth extending from 3.9% to 5% by the end of FY21-22. 

Regarding currency depreciation, Dr. Baqir added that the downfall is largely associated with the strengthening greenback in the global market coupled with high volatility in the oil market which disgruntled almost every oil-importing country, including Pakistan. He further remarked, however, that as the global economy is vying stability, the situation would brighten up in the forthcoming months. Mr. Baqir emphasized that the current account deficit stands at the lowest level in the last decade while the remittances have grown by 25% relative to yesteryear. Combined with proceeds from the recently floated Eurobonds and financial assistance from international lenders including the IMF and the World Bank, both the currency and the deficit would eventually recover as the global market corrects in the following months.

Lastly, the Governor State Bank addressed the rampant inflation in the economy. He stated that despite a hyperinflation scenario that clocked 8.9% inflation last month, the discount rates are deliberately kept below. Mr. Baqir added that the inflation rate was largely within the limits of 7-9% inflation gauged by the State Bank earlier this year. However, he further added that the State Bank is making efforts to curb the unrelenting inflation. He remarked that as the peak summer demand is closing with July, the one-way pressure on the rupee would subsequently plummet and would allow relief in prices.

The MPC has retained the discount rate at 7% for the fifth consecutive time. The policy shows that despite a rebound in growth and prosperity, the threat of the delta variant still looms. Karachi, Pakistan’s busiest metropolis and commercial hub, has recently witnessed a considerable surge in infections. The positivity ratio clocked 26% in Karachi as the national figure inched towards 7% positivity. The worrisome situation warrants the decision of the State Bank of Pakistan. Dr. Raza Baqir concluded the session by assuring that despite raging inflation, the State Bank would not resort to a rate hike until the economy fully returns to the pre-pandemic levels of employment and production. He further assuaged the concerns by signifying the future hike in the policy rate would be gradual in nature, contrast to the 2019 hike that shuffled the markets beyond expectation.

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