And the reason SBP has continued with this stance is because foreign investments have contracted by 74 percent and NFA declined by 37 percent. In other words, while aggregate demand has declined but so has the ability of the economy to meet this demand and flow of resources from abroad to fill this gap.
Had SBP not responded, the inflation outlook and reserve position of the country would have been worse. For instance, the growth in broad money and thus inflation would have been much higher if the private sector had also continued to borrow unchecked from the banking system along with the public sector.