KARACHI, June 4: Pakistan's central bank governor said on Monday that the current tight monetary policy was appropriate and no immediate change was on the cards despite accelerating broad money growth.

“We feel that our monetary stance is adequate for now, so we don't contemplate any further adjustment in our monetary stance,” Shamshad Akhtar told Reuters in an interview.

“We will continue to be in a tightening mode until we see, going forward, any other reason to ease. Currently, we don't see any need to alter our monetary tightening stance,” she said.

There has been some talk of the need to raise the amount of government securities or cash reserves banks are required to keep with the central bank to check broad money growth and curb inflationary pressure, but the central bank seemed comfortable.

“Broad money supply was expected to grow by 13.5 per cent, but it is growing fast, and we will probably slip it by 1 or 2 per cent,” said Dr. Akhtar.

“But it's still a very good pattern ... If the monetary policy slips by 1 or 2 per cent in broad money growth, heavens won't fall. It is not very serious if there is a small slip, as 13.5 (per cent) was a very tight monetary policy.” Broad money, or M2, grew by 13.76 per cent from the beginning of the fiscal year on July 1 to May 19, compared with 12.02 per cent in the corresponding period last year, according to central bank data.

Dynamic economy: The governor said the central bank would act promptly whenever it felt the need to make changes, keeping in view the country's growing dynamic economy.

“Our monetary policy committee meets every six weeks, where we assess the need for any changes. But for the time being, I don't see any,” she said.

“But things are quite dynamic in this country, there are lots of flows coming, and we will keep our options open.” Inflation, as measured by the consumer price index (CPI), stood at an average 7.89 per cent for the July-April period, compared with the full-year target of 6.5 per cent.

Akhtar said the government would also aim to keep inflation at 6.5 per cent in the next fiscal year to June 2008.

“It would be good if we could reach our target of 6.5 per cent, which is the target of this year as well as the next year,” she said.

“Food prices are more volatile and I hope that can be addressed, but at least the government and we are both aspiring to achieve that target.” Akhtar was also hopeful that the country would be able to meet its economic growth target of 7.2 per cent next fiscal year, after it was likely to have marginally surpassed the 7 per cent target for 2006-07.

She said revised figures from the national income account now showed that growth in the 2004-05 fiscal year was 9 per cent, up from an originally reported 8.6 per cent.

“I am quite confident that, as the national income account firms up the figures, they would find that the economic growth would be higher even for fiscal year 2006 and even somewhat higher for the fiscal year 2007,” she said.

“Given the track record of the past as well as the future, the impact of the investment that has already occurred, and the fact that FDI will keep on coming and the government will keep on investing in infrastructure and social sectors that gives us confidence that GDP growth will be quite substantive.” She also said that with the economy growing, and thus the need for higher imports, a current account deficit of 4-4.5 per cent of GDP was manageable.

“As long as we can finance it, I think we can afford, over the medium term, to live with a current account deficit of 4-4.5 per cent.” Pakistan's current account deficit was $6.015 billion in the July-March period -- just over 4 per cent of GDP.

“We should strive to bring it down, clearly, but our import requirements cannot be crushed, because it will impact our industrial performance.” —Reuters