LAHORE – The Federation of Pakistan Chambers of Commerce Industry’s Businessmen Panel has urged the government to control volatility of rupee against the US dollar, as the local currency continued to lose ground and fell to an all-time low of almost Rs174 against the US dollar in the inter-bank market, putting the industrial revival and economic growth at risk.
FPCCI’s Businessmen Panel Chairman Mian Anjum Nisar said that apart from increasing exports and keeping a check on imports the government will have to take administrative measures, as a large demand of cash dollars are seen in the market. He was of the view that State Bank of Pakistan will have to remain vigilant in this regard. Besides this, the SBP and the government also need to intervene and come up with policy reforms to control depreciation of rupee which is becoming more and more valueless.
Referring to the data released by the central bank, he said the rupee maintained the downtrend for the past five month, as it has lost 14.24% (or Rs21.69) compared to the 22-month high of Rs152.27 recorded in May. With a fresh decline of 0.28%, the rupee has depreciated 10.42% (or Rs16.42) since the start of the current fiscal year on July 1, 2021, he added. This indicates that the pressure on the rupee is consistently increasing, he said, stressing the need to devise a strategy on war-footing to increase foreign investment in Pakistan so as to stop the upward trajectory of the dollar. He said that the continuous increase in imports is fuelling the dollar’s demand in the market, saying that there was a possibility of imports rising to $65 billion by the year’s end, up from an earlier estimate. Moreover, he added, the target for remittances from overseas Pakistanis, which was set at $30 billion in June earlier this, was likely to be contracted to $28 billion. However, if the approval of a $6 billion loan package by the International Monetary Fund and the immediate delivery of $1 billion on that account from the Fund could improve the situation, he said. The BMP chairman said that huge depreciation of Rupee continued to damage the economy, as the cost of deals done by the businessmen with their foreign counterparts has increased manifold due to massive fall of rupee against dollar.
Apart from increasing exports and controlling imports the government will have to take administrative measures, as a large demand of cash dollars are seen in the market, he suggested. Terming rupee depreciation against dollar a mysterious development, he said that continued fall of rupee is not understandable with a fact that there was no fundamental change in country’s imports while other economic indicators are also same for a long time.
Mian Anjum urged the government to control volatility of rupee against the US dollar, as the industrial revival and economic growth is not possible without stability of local currency. He said that the high import bill this year was enough to signal the market that demand of dollar was very high.
He observed that the market-based flexible exchange rate system, resilience in remittances and other factors can help contain the current account deficit in a sustainable range of 2-3 percent of GDP in FY22. He said that the rising of dollar is not logical despite the fact that the State Bank says Pakistan’s external position was at its strongest in 10 years with 0.6pc current account deficit in FY21.
He emphasized the need to keep incentivizing export-oriented sectors in order to take the exports to the next level. He said that there is no denying of the fact that the government has been facing numerous economic challenges besides other internal and external issues and problems during the last three years. He said that textile industry has been maintaining top position in exports and is the lifeline of Pakistan’s exports, which would be further increased after decision of government’s relief to this sector. With the resolution of hampering issues, he hoped the share of export could go high further in FY 2021-22.
The FPCCI former President said that the objective of the loans should be improving fiscal management as well as the regulatory framework in order to foster economic growth and local industry competitiveness in global market which is not possible without stability of domestic currency.
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