Social impact of monetary policy highlighted

LAHORE:A consultative meeting on “State Bank of Pakistan’s autonomy, credibility and inflation expectations” was held at Government College University (GCU) here on Monday.

According to a press release, the meeting was held in collaboration with Sustainable Development Policy Institute (SDPI) and Friedrich Ebert Stiftung (FES) in which panellists included GCU Vice-Chancellor Prof Dr Asghar Zaidi, SDPI Research Fellow Dr Sajid Amin Javed, Bristol University UK Lecturer Dr Ahmed Jamal Pirzada, Business Recorder Head of Research Ali Khizar Aslam and GCU Associate Professor Dr Saima Sarwar.

The panellists discussed the social impacts of monetary policy in Pakistan. Prof Asghar Zaidi welcomed SBP’s approach of opening up their policies for debate in order to receive feedback from the experts and academia. He emphasised understanding SBP’s role in tackling the most prominent and basic issue of Pakistan - inflation, keeping in mind the social repercussions of the changes in monetary policy.

Dr Sajid Amin Javed referred to his recent study titled ‘Monetary Policy for All: Understanding the Social Footprint of Monetary Policy in Pakistan’ and highlighted the growing evidence of monetary policy’s influence on social indicators such as inequality. His recommendations for SBP, in the light of the Amended Act of 2021, entailed its focus on price stability using fixed and quantifiable inflation targets, and enhanced interaction with civil society and academia, in order to further propagate and expand this debate.

Dr Ahmed Jamal Pirzada pointed out some discrepancies between SBP’s claims about anchoring the inflation expectations and the data-on-ground. Referring to the State Bank’s failure to control inflation even after the enactment of the recent autonomy act, he placed the responsibility on the lack of coordination between the fiscal and monetary policies of the government.

Answering the same question, Ali Khizar underscored the role of SBP’s expansionary monetary policy and other private finance schemes, coupled with a huge proportion of cash-on-hand that is out of the banking channels, in shooting up the inflation rate and making it hard to bring it down.

The panellists also discussed the role of academic institutions in increasing awareness among the students regarding the role of SBP in targeting inflation through its monetary policy.

Dr Saima Sarwar suggested the initiation of financial literacy programmes sponsored by SBP and SDPI, along with an open access to their data in order to expand research and suggest informed policy recommendations. She highlighted the need of SBP-funded research chairs in each educational institution that could help in bridging the gap between theory and practice. The meeting concluded with the panellists suggesting SBP’s increased communication regarding its monetary policy, its linkage with the problems of common man, and the accountability of its performance regarding inflation targeting, before the parliament.