KARACHI: “In a world of uncertainty and the impact of global developments, including Covid-19, economic policymakers will face many challenging and unprecedented headwinds. In these circumstances, three themes — the Belt and Road Initiative, climate change and technology with sustainable finance — will play as the underlying feature and core areas in bringing value to the financial industry, economy and the world as a whole.”

This was stated by former governor of the State Bank of Pakistan Yaseen Anwar, during his talk titled ‘The pandemic: challenges and trends for the global economy and Pakistan’, organised by the English Speaking Union of Pakistan at a hotel here on Thursday.

“The challenges are many and as a former central banker, I would like to share my thoughts on how I see the world reshaping itself going forward. Pakistan will need to take decisive strategic policy measures to ensure sustained economic growth,” he said, adding that given the shocks to the global economy that we are facing and will continue to face going forward, it is incumbent on central banks to ensure that inclusive and sustainable growth isn’t stifled.

“We must take proactive measures to provide sorely needed capital and appropriate macro prudential regulations to stimulate growth that will spur employment and urbanisation in emerging markets,” he said.

He added that China today has become even more attractive due to its resilience and stability in managing Covid-19 with its hospitals and health officials in a coordinated way. About the Belt and Road Initiative (BRI) and the China-Pakistan Economic Corridor (CPEC), he said that its underlying infrastructure, the core of its funding, is and has been the engine of growth for most economies.

‘Technology innovation in the payments space is good for consumers’

“The lack of quality infrastructure has hampered the economic development that many belt and road-related countries sorely need. For example, the shortage of power in Pakistan has impaired the GDP growth rate of up to three per cent. The absence of a developed transportation network for refrigerated trucks for distribution of agricultural products results in a 50 per cent loss of perishable products,” he said, adding that numerous countries have already felt the benefits of new employment opportunities and improved productivity thanks to BRI projects.

“The second area of increasing importance is tied to climate change that is now an existential challenge of our time and a key component of BRI’s emphasis and priority. Its importance has become even more elevated with Covid-19 as it has sensitised the world to how vulnerable we are to the forces of nature,” he said.

“Climate control has sensitised the world where financial risks need to be carefully accessed in the financial sector. Accounting firms can play an important role in assessing and providing expertise to financial institutions on how to adopt sound methodologies and tools to identify environmental risks to their loan portfolios and review their audit reports accordingly. Most central banks are beginning to review and adopt such risk mitigant measures with an emphasis on disclosure,” he said.

“Aside from BRI and climate change, the third area that will change the landscape will be technology,” he said.

“Due to lockdowns, the use of online orders for shopping or food has been the backbone of survival for those who have had access to technology. Adapting to digital banking and operating from home has elevated corporate executives on how to manage during severe business interruptions,” he said.

“Various studies have shown that 1.7 billion people globally are excluded from accessing basic financial services such as payments. Studies by the Asian Development Bank have shown that 85 per cent of the adult population in South Asia does not have access to basic financial services. Small businesses have been hit hard and fintech companies will fill up this space more and more. Getting a better handle on cash on hand and the returns are essential for avoiding government handouts. Technology innovation in the payments space is good for consumers and central banks must keep pace with the risk landscape without compromising financial inclusion. To manage it, they must devote attention first to their domestic markets and establish appropriate regulations and national payments councils that many emerging markets don’t have,” he said.

“The challenges of regulating cryptocurrency and other similar payments need to be carefully assessed before we are forced to confront unintended consequences. Cash in circulation has been regulated in a controlled environment by central banks. Digital currencies, meanwhile, may not necessarily be completely under the control [of] central banks. National payments councils that include all stakeholders aside from the central banks need to be all-encompassing in assessing the inherent risks with clear regulations before they launch cryptocurrencies and potentially weaken our trust in the international monetary system again,” he said.

“We must ensure policymakers consider all these issues and work in a collective and coordinated manner towards global growth in a multipolar world that uniformly benefits the planet,” he concluded.

Published in Dawn, December 18th, 2020