ISLAMABAD, March 18: The Monetary and Fiscal Policies Coordination Board on Tuesday reviewed the overall economic situation in general and monetary policy developments in particular, and noted with satisfaction the overall economic performance during the first eight months of the current fiscal year.

The meeting of the board was presided over by Shaukat Aziz, Adviser to Prime Minister on Finance and attended by the minister for commerce, deputy chairman, Planning Commission, governor, State Bank, secretary, Finance and the Director General, Debt Office, Finance Division.

The board noted that given the difficult external economic environment caused by the threat of war in Iraq resulting in higher prices of oil in the international market, depressed global economic environment, and sluggish international trade, the overall economic performance has remained encouraging and provides ground for optimism for the remaining months of the current fiscal year.

The board also reviewed the developments in monetary sector with special reference to the massive inflow of foreign exchange in the country resulting in more than doubling of the net foreign assets of the banking system. The board was informed that the State Bank of Pakistan has successfully neutralized the monetary impact of the foreign exchange inflow and at the same time ensured external competitiveness of Pakistan in international trade and also kept a close watch on inflation through its sterilization policy.

The board also discussed the various instruments of National Savings Schemes. It was agreed that the government will make every effort to reduce the quantum and cost of borrowing from these sources.

The issue of pre-payment of expensive external debt also came under discussion. The board asked the Director General, Debt Office to prepare an appropriate mix of both domestic and external borrowing strategies as well as to examine the nominal and real cost of domestic and external borrowings.

The board was also informed that the entire term structure of interest-rate has declined and the interest rate environment has become quite conducive for investment.