KARACHI: The State Bank of Pakistan (SBP) has begun an exercise to strengthen its statistics department by making it “go beyond traditional economic data”.

Speaking at conference organised by the Association of Chartered Certified Accountants (ACCA) on Wednesday, SBP Deputy Governor Sima Kamil said the central bank has set up a new division by the name of Avant-Garde Digit, which will bring innovation to data collection and presentation methods with the help of artificial intelligence.

“We’ve set up a team of economic agents across the country to collect anecdotal data about business conditions. Inflation, for example, is very much based on expectations. We’ll have teams of people that’ll meet businesses, small and large, and assess and gain economic intelligence,” she said.

The SBP will also introduce a digital consumer price index to track real-time inflation while using “multiple layers of non-traditional data” using satellite images. “We’re trying to be a responsive organisation. We’ve increased the frequency of monetary policy committee meetings from six to eight times a year,” she said.

In her speech on “building economic resilience in uncertain times,” the SBP deputy governor said leaders must resist the urge to oversimplify problems in the midst of uncertainty. At the same time, leaders shouldn’t blow the risks out of proportion either, she said.

Uncertainties came in “very quick succession” after Covid-19, she said. The Russian-Ukraine war stoked a global crisis in the commodities market that caused concerns on energy and food supplies. At home, political uncertainty, delay in the IMF ninth review, high inflation, depletion in foreign exchange reserves and depreciation came one after another. “And just when we thought we were adjusting to this, we had floods. Many things that you think are unlikely to happen together did happen together,” she said.

As a result of these events, the SBP has increased the frequency of its stress-testing exercises that gauge the state of resilience in the banking sector for “severe but plausible” shocks, she said.

Ms Kamil listed four specific measures to prepare for a world full of surprises. One, steps to build economic resilience are best taken before, and in preparation of, uncertainty. Two, the system has to build upon the basics like risk recognition, conserving liquidity, maintaining solvency and not forgetting that one has a future to plan for. Three, leadership in uncertain times has to be “agile yet measured”. Lastly, understanding that it’s not possible to keep everyone happy in a crisis. “You need to have the courage to set priorities,” she said.

Calling the new sources of risks and uncertainties “Four Ds,” the SBP deputy governor said decarbonisation, digitisation, de-globalisation and demography are likely to produce unprecedented risks for businesses and households.

Speaking on the occasion, Habib Bank Ltd CEO Muhammad Aurangzeb said the ongoing economic crisis also presents an opportunity in the sense that the government’s “hand has been forced” by the IMF.

Published in Dawn, February 23th, 2023