Inflationary impact to be visible in a few months: Deputy Governor SBP

ISLAMABAD: The government has conceded that inflationary impact of the current rupee depreciation would become visible in the next few months – two months to six months – as the members of the committee expressed serious concerns over the dearness in the county.

This was stated by the Deputy Governor State Bank of Pakistan (SBP), Dr Inayat Hussain, during a meeting of the National Assembly Standing Committee on Finance presided over by Faizullah Kamuka, which has expressed serious concerns over the depreciation of rupee and its impacts on the inflation in the country, making life of the people difficult.

The meeting was informed that it takes time for inflation to come down consequent to the depreciation of the rupee, and Ahsan Iqbal said that this means that the real storm of inflation has yet to come.

The committee sought a briefing on inflation from the Ministry of Finance and the SBP, and the deputy governor SBP stated that the depreciation of rupee against the dollar had no instant impact on the inflation but it would be visible in few months.

Upon this, Ahsan Iqbal of the Pakistan Muslim League (N) said, this means that there would be bad times ahead.

Aisha Ghaus Pasha wanted the committee to also take a briefing from the government on sovereignty of the SBP, and the chairman of the committee said that the bill to this effect has not yet come to the committee and the discussion could not be held on assumptions. The rupee has depreciated by more than 10 percent since July, the deputy governor SBP said. Rupee depreciates 6.7 percent in 2020-21 and 4.8 percent in 2019-20, the deputy governor SBP.

The current account deficit is 3. 3.4 billion, the deputy governor SBP said.

The committee has expressed serious concern over the devaluation of Pak rupees to the US dollar, and conveyed their apprehensions with regards to the increase in inflation. During the meeting of the National Assembly Standing Committee on Finance and Revenue held here at the Parliament House on Tuesday, the committee members were of the opinion that the devaluation of Pak rupee will not provide any space to control the inflation in the country.

The committee noted the effects of trade deficit and current deficit on the economy. The committee decided that the governor State Bank of Pakistan (SBP) may be invited in the next meeting of the committee for further discussion in this regard.

The committee deferred the remaining agenda for its next meeting due to shortage of time. The committee also discussed the issues noted during the visit of the Parliamentary delegation to Azerbaijan headed by the Speaker regarding prolong and cumbersome due diligence by Pakistani banks over use of Iran (Taftan border) as transit country, above and beyond Anti-Money Laundering (AML) requirements set by the SBP. Special invitees briefed the committee that in many instances, documents have to be changed showing other Central Asian countries to conduct trade between Pakistan and Azerbaijan.

The situation needs serious mitigation. They were of the recommendation that selected commercial banks may be asked to do away with these onerous requirements. The special invitees/members have shared their observations regarding the issues being faced to the business community of Azerbaijan and Pakistan due to banking system and lack of interest by the private banks.

After threadbare discussion, the committee directed the SBP to come up with a viable solution of the problems being faced by both sides, in consultation with all the stakeholders within 30 days.

The committee discussed the calling attention notice regarding deduction of five percent maintenance allowance from the salaries of the federal government employees working in BPS-6 to BPS-15 move by Ali Nawaz Awan, MNA.

The additional secretary Ministry of Finance informed the committee that the prime minister during the recent meeting held on 29th October 2021 on the affairs of Pak-PWD has decided that five percent deduction from the salary of federal government employees may be diverted to Pak-PWD in consultation with relevant stakeholders, accordingly, the two proposals were submitted i.e.

(i)The employees of BS-1 to BS-5 may remain exempted from deduction of five percent normal rent and the employees in BS-6 to BS-22 of all departments including President’s Secretariat, Prime Minister’s Office, National Assembly Secretariat, Senate Secretariat, and National Accountability Bureau may be charged five percent normal rent on account of allotment of government accommodation and exemption granted to the employees of these departments may be withdrawn to avoid discrimination among the federal government employees.

(ii)The five percent deduction from salary of FG employees may be diverted to Pak-PWD in consultation with relevant stakeholders as decided by the prime minister.

The meeting was attended by Sadaqat Ali Khan Abbasi, Jamil Ahmed, Faheem Khan, Ahsan Iqbal Chaudhry, Qaiser Ahmed Sheikh, Dr Aisha Ghous Pasha, Dr Nafisa Shah. Movers Ali Nawaz Awan, Kishwar Zehra and special invitees Raja Khurram Shahzad Nawaz and Munazza Hassan besides the senior officers from the Ministry of Finance and Revenue, the SECP, the FBR, the Ministry of Housing and Works, the SBP and the Ministry of Law and Justice.