Question

You are recently hired in the Research firm where you got the assignment on forming a Capital Market Expectations. However, recent pandemic impede the growth numbers each of the business sector. State bank of Pakistan taken the significant measure to combat with the ongoing situation of Pakistan due to novel coronavirus. Your research head assigned you a task which is related to writing a brief report on “Revival of Economic Growth of Pakistan” which are mentioned below: -

1. Describe the inflationary pressure on Pakistan economy along with its future outlook with forecast of future monetary policy rate.
2. Pakistan Current Account came into surplus so what type of measures Govt. has taken to control the current account deficit, further, compare the last govt. period with incumbent govt. steps for improving the Pakistan economy.
3. What are the key determinants of PKR/USD rate and your view on future rate whether it’s going to devalue further or strengthen PKR against dollar?
4. Most importantly, net exports impact on the growth of Pakistan economy.
5. Lastly, you have to include the banking channel liquidity constraints due to Covid-19 and what steps SBP has taken for smooth operational efficiency of banks. (hint: CASA deposits, Advance to deposit ratios, Capital adequacy rate, liquidity coverage ratio and net stable funding ratios)

Instructions:

you need write a brief report (200 words) based on the data you have gathered what would be your analysis regarding the interest rate forecast keeping in mind the economic circumstances and international restrictions on Pakistan?

This is the whole Question..

Answer 1

00 = you are recently lived in the Research firm where you got . Sol: capital market expectations is inflation can defined as constant rise in price. The inflation was 3.93% in 2018 which increased to 6074% in 2019 and again increased to 11.12°%0. The Inflation in Pakistan increasing years. Due to the increase in the inflation The prices of goods and services has inflated. The basic commodities such a food vagetables, fruits, milk, and other services has in slated. This leads to high prices which cannot be offorded by the poor and middle class families. This is also leading to disparities of income between the rich and Door, The rich are getting richer and poor are getting poores due to inflationary pressures. bank of Pakistan is naane tory polpey rate is decided by the The

9 Ay The Current Govt was been able to drop the state bank of Pakistan. In order to control inflation, The Bank has to in erea se The interest rate. Due to the increase intrest pate, the amount of people taking loan Shall decrease, The's in turn, will decrease the purchase of goods and services. Due to this, the price of goods and services. Shall decrease This would eventually control inftán. The current acount of Pakistan is supplies. the main reason of this @ made Exports Cheapes made imports costly © improv e competitiveness of domestic firme against international forms. Devaly -ation. => Pakistan Oconomy along with its future out look monetary polocy rate . the steps taken by current govt to improvise economy in a better way than previous govt are Flows: fiscal account deficit by 80% . 66 There is a rise in Foreign direct invest -ment

3 The reseves of state bank of pakistan are at 21-month high. cy The GDP of the country is increasing on a fast pace. The aDP Key determinats of PKR/USD a = rates. o inflation ces interest Rates (11) Speculations (V) Balence of payment (v) public Debt The pakistan current rate at & 168.514 of $1. PKR as on 09-05-2020. Accor -ding technical analysis using RsI candle stick , ADX, valume, open interest and option chin. The following dates cite the Dyo bability of the psk current to stregth en in the upcoming year. The Pakistani Currency shall become strong in comparison to usis. The increase in net Exports leads to the inflow of Forgin Exchange in the country.

many more. more. so This helps to increase the production Q for increase in the exports. Increase in Exporte leads to increase in employement. Demand, flow of money an increasin Net exports can help to the economy to grow. The Covidla has effected the liquidity position of the banks in pakistan. The control bank ini e ted & 7 billion or the GDP for liquidity purposes. The central bank also slashed its monetory policy by 100 basis points. The 2.5% liquidity coverage ratio is 16 of. qround projected. The overall Financial health and Free cash flow are in balence due to the active management & support. in Gout pandamec situations. Coved - La o