ECONOMIC, PRICE AND FINANCIAL SYSTEM STABILITY, OUTLOOK AND POLICIES

Figure 1.1

1
The Socio-Economic Crisis in 2022, Policy Actions and Outcomes Towards Restoring Stability

Persistent Twin Deficits

Unsustainable Increase of global

Rating downgrades High inflation Falling tax
Low GDP growth Budget
revenue public debt food and energy
and limited access to and de-anchored Deficit prices
over several years
foreign financing inflation External
Current Account
expectations

Power cuts, fuel and Heightened social unrest

Increased monetary Near-zero level of BOP and political upheaval
gas shortages
financing usable official reserves

FERTILISER

Dual crises Rs

Substantially Domestic and forex Scarcity of Sovereign BOP Ban on the Low earnings from Misaligned
increased inflation market liquidity essential items + importation of tourism and workers’ exchange rate
debt crisis crisis non-organic fertiliser
adjusted poverty line pressures remittances

Significant tightening of monetary policy

Stabilising the exchange rate Announcement of the debt standstill and

through market guidance Credible and commencing debt restructuring

Supply of forex for transparent policy Negotiating an IMF-EFF

essentials Arrangement
measures prevented
Forex and rupee liquidity further worsening of Substantial fiscal
management tightening
the crisis and restored
Import restrictions/margin Strengthening social
deposit requirements socio-economic safety nets
stability
Continuous financial
SOE reforms
sector oversight

Real GDP
Headline 2.3 Growth (%)
Inflation (%) Rs. 363.11 2018
End Dec-22

Daily market guidance

69.8
Sep-22 50.3
Mar-23 Rs. 327.29
Exchange Rate End Mar-23
12.1 (Rs./US$)
Dec-21 -7.8
3.0 2022
Jan-21
Rs. 200.43
End Dec-21

The outcomes of coordinated policy actions have eventuated since late 2022,
and the country managed to transition to a workable equilibrium until the assistance
from the international financial institutions begins to materialise.
Decelerating Official Market Positive GDP Improving Financial Improving Declining Advancing the IMF Executive
inflation and reserve determined growth expected primary sector current interest debt restructuring Board
anchoring buildup exchange rate towards late 2023 balance stability account and rate risk process approval for
inflation trade balance premia the EFF in
expectations

%
March 2023