KARACHI: The business community has called on the government to control the exchange rate because economic and industrial expansion is not possible without a stable local currency.
Mian Anjum Nisar, former chairman of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and chairman of the Businessmen Panel (BMP), said in a statement on Monday that the dollar continued to appreciate against the rupee. due to the increase in the current account deficit. and soaring import bills.
Apart from increasing exports and controlling imports, the government will have to take administrative measures, as a high demand for cash dollars is observed in the market.
Calling the depreciation of the rupee against the dollar a mysterious development, he said the continued depreciation of the rupee is not understandable given that there has been no fundamental change in economic indicators. from the country.
The former FPCCI chairman said the flexible market-based exchange rate system, resilience of remittances and other factors can contain the current account deficit within a sustainable range of 2-3% of the GDP in fiscal year 22.
The rupee remained on the beneficiary side, depreciating 0.5% against the dollar in the interbank market, as pressure continued on the currency, amid a lack of clarity on inflows and economic support from lenders. international and friendly countries.
In the open market, the local currency lost 50 paisa on the purchase, while the sale remained unchanged, closing at 186.50 and 187 respectively.
According to the State Bank of Pakistan (SBP), the rupee closed at 186.63 after a daily decline of 94 paisa, or 0.50%. On Saturday, May 7, 2022, the Rupee closed at 185.69 after falling 0.03%.
The rupiah had remained broadly stable before the fall as the market viewed Pakistan’s macroeconomic indicators and ongoing talks with the International Monetary Fund (IMF) as providing some level of clarity for the future. However, since then there has been little to no progress on these fronts.
Since May 2021, the dollar has appreciated by 7.15% against the rupee, which has pushed up the cost of imported goods and created uncertainty about the stability of the exchange rate.
The dollar was at Rs164 in October 2020 and was again hovering in the range of Rs186 in May 2022.
Nisar said the State Bank of Pakistan and the Ministry of Finance will have to remain vigilant in this regard. In addition to this, the central bank and the government must also intervene and come up with policy reforms to control the depreciation of the rupee, which is losing more and more value.
It is regrettable that Pakistan announced about eight years ago in 2013 to start its financial transaction with several countries under the currency swap agreement, aimed at controlling its import bill and position of its balance of payments, but no implementation has been seen so far, he added.
Trade and industry have no idea what the real exchange rate the central bank needs and the end point of the rupee’s depreciation, he said, adding that while exporters would get some benefit on their export earnings, the whole economy would face a tough time, as costs increased and ultimately this would affect consumption, which is the main driver of the economy.
Nisar urged the government to control the volatility of the rupee against the dollar, showing that the exchange rate is not managed by the State Bank of Pakistan (SBP), but it also indicates that the exchange rate n is not stable.
The end of the previous financial year with the increase in the current account deficit dealt a severe blow to the exchange rate, while the fear of an increased demand for dollars was further exacerbated with the information of the SBP that the county would need dollars to repay the loans.
The high import bill this year was enough to signal to the market that the demand for dollars was very high, he said, adding that growing instability in the region has sparked fear in Pakistan that could harm lives normal economy of the country, motivating people to buy dollars. At the same time, exports to Afghanistan have declined.
According to Nisar, the huge depreciation of the rupee has continued to hurt the national economy as the cost of transactions made by businessmen with their foreign counterparts has increased significantly.
The former FPCCI chairman said excessive government borrowing, lack of foreign inflows, lack of foreign investment and huge current account deficit are the main reasons for the steady depreciation of the rupee.
The local currency has been under pressure due to falling foreign exchange reserves and increasing outflows, amid external debt repayments, he said, adding that the SBP’s foreign exchange reserves have been stretched. under pressure due to foreign debt repayments.