EXCHANGE RATE SYSTEM
Pakistan’s exchange rate is a “market-based exchange rate system” that follows supply and demand, but State Bank can not leave it entirely to the market, Raza Baqir said in his first press conference as State Bank of Pakistan (SBP) governor. ‘So, if there is volatility, then the State Bank intervenes. You need to keep a close eye on the market. That is our regime, and we want to go with this regime’, Baqir added.
Since May 1999, Pakistan has been following a market-based flexible exchange rate system. The inter-bank rate applies to all foreign exchange receipts and payments both in the public and private sectors. Demand and supply determine the exchange rate in the foreign exchange rate market.
Governor State Bank of Pakistan Dr. Reza Baqir has said the central bank’s foreign reserves have risen to $12.9 billion from $7.3 billion after adopting the market-based exchange rate system for Pakistan’s currency. An exchange rate that remains fixed artificially for a long time is not in favor of Pakistan’s economy. On the other hand, free-float is also not possible.
Reza Baqir said the central bank’s independence was vital, and it will now follow market realities. Adding that it will no longer give loans to the government and cut money printing by the central bank that has stoked inflation. “This is a very big improvement for financial and monetary policy,” he said.
He was addressing the Pakistani business community in Dubai for the promotion of “Roshan Digital Account.” Reza Baqir outlined the current economic policy of Naya Pakistan.He asked the overseas Pakistanis to take advantage of “Roshan Digital Account” and open the digital account with ease. The construction sector plays a vital role in the economy of a country. This system of exchange rates will undoubtedly be advantageous for this construction sector.
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