Mr. Reza Baqir, newly appointed Governor State Bank of Pakistan (SBP), held a press conference recently on economic outlook of Pakistan which seemed to be focused on three key areas. These areas include agreement with International Monetary Fund (IMF), Exchange rate regime and Interest rate. It was his first mass communication through all kind of media to all stakeholders and to general public at large. He looked determined and positive about the economic tools he would apply through central bank for sake of monitoring and controlling Pakistan Economy. Without mentioning previous practices he ensured about the role of SBP may be followed in true of its spirit for controlling inflation, prudent banking procedures and economic growth of the country. According to the respected Governor Current Account Deficit (CAD), Trade Deficit and huge borrowing from SBP were such anomalies which de-shaped our economic outlook, however these negative factors are being addressed by the present Government. As he remained a key player of IMF program in Egypt he explained Egypt case while comparing it to Pakistan’s scenario where fiscal deficit problem may be the same before installing IMF program but interbank exchange rate difference with that of informal market is quite narrow in Pakistan which is a positive sign.Though his speech according to Economic theory seems perfect for addressing the economic problems of Pakistan but time will prove if implementation of the same may be translated into desired outcome. It is predicable from the governor’s press conference and economic situation of Pakistan that devaluation can happen further which will bring inflation in result and that may be countered by increasing interest rates. However if fiscal deficit may be controlled by collecting more taxes as targeted in recent budget, situation may be changed in favor of the country First key area which he discussed was IMF and its implication on economy. He stated that IMF program will benefit Pakistan not only that the financing is available at low mark up but it will help country to bring more dollar inflows in form of low markup loans and investments from other financial institutions and friendly countries. Secondly, He pleaded for free float of exchange rate by account for demand and supply impact with acertain level control of central bank. Due to heavy protection i.e. fixed exchange rate regime, Pakistan faced twin deficit (CAD and Trade Deficit) to the worst of its history but after devaluation of currency twin deficit falls considerably, he added. Neither fixed nor free float exchange rate regime is good for Pakistan as former can lead to external account imbalance and latter can manipulate the rate. Thirdly, he ensured, Monetary Policy Statement (MPS) is designed to fight against inflation on forward looking manner and the committee is independent. On rising interest rates he stated that it is time for Pakistan to decide either to control inflation or to check cost of debt servicing. As government is committed towards an optimum level solution therefore inflation is being addressed. Last but not the least government has decided not to borrow from SBP which is also a condition of IMF so that the central bank may feel more autonomy and it can prevent Pakistan from inflationary pressure due to the fact that central bank publishes currency to give loan to the government which increases money supply. Hence; more money supply means more inflation whereas less money supply would lesser the inflation. Comparing Governor SBP speech with present situation of Pakistan, it is observed that the Financial czars are determined toward controlling twin deficits along with fiscal deficit not only according to the IMF conditions but it is the only way which can cool down the economic emergency. “Yes, yes the worst is over” Governor claimed however there is lot more things which require to be answered. Devaluation of currency impacted in slowdown of imports but it is not giving boost to export. The country’s export during May 2019 witnessed a decline of 1.72% however negative growth in imports of 12.8% in same period checked the Trade Deficit. On the other side, due to rising interest rate scenario, bank financing cost has increased to more than double for industries heavily dependent on bank borrowing that bridge their working capital requirement. Increasing in interest rate while depending on consumption based inflation can undermine the position of production side which can further intensify the situation of economic slowdown. In addition to it, a good decision of not borrowing from SBP to avoid inflation can result in shortfall of liquidity with the banks for private sector, from where, after this decision, government will increase its borrowing numbers.It is predicable from the governor’s press conference and economic situation of Pakistan that devaluation can happen further which will bring inflation in result and that may be countered by increasing interest rates. However if fiscal deficit may be controlled by collecting more taxes as targeted in recent budget, situation may be changed in favor of the country. Yet this is an economic assumption which is dependent on fair implementation of budget and government’s commitment towards broadening tax net. The writer is Corporate a Specialist and a Chartered Banker (UK). He can be found at twitter: syedaliimran75)