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Stable exchange rate linked to low inflation, says Tarin

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Finance Adviser Shaukat Tarin has stressed on the need to stabilise the exchange rate in order to overcome inflation in Pakistan.

In an interview with a private TV channel, he said instability in the exchange rate has increased inflation and the government was trying to lessen its burden on people belonging to the low-income group.

Tarin attributed inflation to a decline in the exchange rate, saying the government needed to keep it near to the “real effective exchange rate” that is Rs166-167.

He said the government should not let the exchange rate overvalue or undervalue, adding that the government should have bought the US dollars when it was Rs152 and sold it at Rs175.

Tarin said the rupee was undervalued by Rs9, adding that this was affecting food imports causing inflation.

Earlier this month, Tarin had blamed speculators for the rise in the value of the US dollar against the Pakistan rupee.

Read Rupee drops to historic low

During the interview, Tarin said the government will table a “mini budget next week” to meet the demands of the International Monetary Fund after both sides reached an agreement last week.

Tarin said as per the IMF demand, the government will impose new taxes to the tune of over Rs300 billion. He added that the IMF wanted new taxes up to Rs700 billion but he managed to reduce the amount after months-long negotiation.

Tarin said the government also didn’t agree to hike power tariff by more than Rs4 as demanded by the IMF as it didn’t want to overburden the people.

The government will increase the power tariff less than the demand of the IMF, he added.

According to Tarin, the IMF also wanted 17 per cent sales tax across the board.

Tarin said the State Bank of Pakistan (SBP) chief will be appointed by the federal cabinet, adding that the term of the governor will be five years but it would be renewable.

The finance adviser also commented on the gas crisis in Pakistan, saying the government failed to procure gas when it was being sold cheap in the global market.

The government missed the opportunity for cheap gas, he said, adding that now the prices of the commodity were high in the international market.



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