ISLAMABAD: The government on Thursday indicated at continued ease in fiscal and monetary policies to revive economic activities depressed by coronavirus-led lockdowns and global economic slowdown and rejected moves to abolish the Monetary and Fiscal Policy Coordination Board (MFPCB) led by Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh.

“This high-powered board facilitates policy makers to review and coordinate in an effective manner to adopt a comprehensive set of policy actions to overcome the economic challenges that we are facing at internal and external fronts”, said a statement issued by the Ministry of Finance after a meeting of the MFPCB.

The adviser also “emphasised the need for better coordination among stakeholders for arriving at consensus on targets of macro-economic variables and the required policy actions to achieve them”, the statement said.

He went on to stress that all organs of the state should play their role in this difficult time to fully capitalise their potential to achieve macroeconomic targets as per their mandate.

The recommendation for accommodative fiscal and monetary policies came from the Planning Commission and was also supported by others, said an official but explained that it was an ongoing consultative process with futuristic outlook for coming budget and beyond and should not be construed as an emphatic decision. A high-level think tank on economic issues setup by the PM has also proposed further ease in monetary policy which has seen 425 basis points cut in less than three months to nine per cent.

Govt rejects proposal to abolish MFPCB

The State Bank of Pakistan (SBP), through an International Monetary Fund-supported amendment to SBP law, has been seeking a complete independence to focus its monetary policy on targeting inflation only and give up its existing dual role of supporting economic growth and maintaining price stability.

To achieve this independence, the SBP has sought among other things the abolition of the MFPCB led by the Finance Minister/Adviser to the PM on Finance, removal of secretary finance from the SBP board and a guaranteed five-year term for governor without any accountability. The proposal has faced stiff opposition from the Ministry of Finance.

Planning Commission Deputy Chairman Dr Jehanzeb Khan told the meeting that coronavirus had declined the confidence of both consumers and investors.

“Thus, both aggregate demand and supply has been disrupted and the stakeholders are following risk aversion behavior”, he said and advocated further government support in terms of simplification of processes and lowering administrative burden on businesses, and help small and medium enterprises find ways to cope with the emerging situation.

He said the accommodative fiscal and monetary policies will be helpful in stimulating economic activities.

Adviser to the PM on Commerce and Investment Abdul Razak Dawood said that in the prevailing situation, total fiscal year exports would reach $21-22 billion, while imports will fall to $42bn mainly due to a decline in international commodity and oil prices. There was a risk of decline in remittances, he said but noted that due to decline in imports current account deficit may not be adversely affected.

Even in these testing times, Pakistan’s exports to Africa and the Middle East have remained positive and are growing which has been a direct outcome of the government’s efforts to explore new avenues in export markets, he added.

Published in Dawn, May 1st, 2020