‘Currency’s overvaluation keeping exports down’

Published: January 13, 2016

KARACHI: Former finance minister and senior economist Dr Hafeez Pasha has said that it is not possible to compete with the European market when your currency is 16% stronger than the European counterpart, urging the government to focus on increasing exports by making them cheaper.

He was invited as the keynote speaker at a consultation session titled, ‘Two Years of GSP plus Status :  A Stakeholders’ Review of the Conventions’ Implementation’ organised by Pakistan Institute of Labour Education and Research (PILER) at Jahangir Siddique Auditorium at IBA City Campus, Karachi.

According to Pasha, depreciation of Pakistani rupee is important to increase exports to the leading markets of the world.

“There is no doubt imports reap a lot of profit, but we should move towards a production-based economy that will cause an increase in employment and increase in the export sector of the country.

“Although Turkey is the main competitor of Pakistan in the European market due to its historical relations with Europe, we cannot ignore the fact that Turkey’s currency- Lira-has deprecated 40% against European currency.”

Pasha pointed out that the stronger currency has caused a decline in exports. “During the two years of the GSP plus scheme, Pakistani exports to Europe have increased. But the increase in the second year has been far less than the first.”

Privatisation issue

While commenting on the privatisation of Pakistan International Airlines (PIA), Pasha appreciated the carrier’s labour unions, which took a stand against the privatisation of the national asset.

“Air India incurs more loss than PIA but they never talk about privatising their airline.” 

Published in The Express Tribune, January 13th, 2016.

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Reader Comments (4)

  • asad rizvi
    Jan 13, 2016 - 11:54AM

    Dr.Pasha’s statement that depreciation of Rupee is the cause of fall in Exports makes little sense, as I find it misleading and hence, would misguide the readers and I would like to respond with facts.

    It seems he has Zero understanding about the Foreign Exchange market. Euro’s weakness is caused due to weak economic condition since 2008-09 in Euro zone forcing European Central Bank to opt for Zero Interest Rate Policy, with latest Euro 1.1 Trillion Quantitative Easing (QE). The liquidity is mainly diverted towards Capital Injection and only tiny part goes to the Corporate Sector, which is why its Economy is struggling to recover. In its latest move ECB deposit rate is now in Negative, which means if banks wants to park funds with ECB, it pay has to pay 0.2 pct or at Minus 0.2 pct.
    While, for the Pakistani Exporters, once pricing is fixed then only he approached bank to open Letter of Credit. At the time of Booking, it is the responsibility of Exporter to obtain currency Hedge. By not selling Euro or Foreign Currency Exporters is indulging in Speculative Business.

    While Turkey in recent times is faced with numerous problem, it is Political at home and also struggling to contain Kurdish issue. It has Structural problem such as persistently high Unemployment, Low Growth and High Inflation. Disappointing Tourism figures weakened its Consumer Confidence.

    For readers interest, Annual (2015) Tourism in Turkey was nearly 42 Million Visitor that briough inflow of USD 30 Billiion. Whereas Pakistan’s Export is struggling between USD 24-26 Billion since last Six Years and during this period Pak Rupee lost nearly 30 pct of its value from Rs 81.20 Per USD (2009) 104.90 (January 13, 2016)

    Here I am providing more data, please do some soul searching, as Pakistan is required to modernize its technology instead of depending on subsidies.

    What makes hin think that Pak Rupee is overvalued and depreciation would do wonders? Let’s do some soul searching.

    Our economist/exporters/experts/analyst always compare Pak Rupee with Indian Rupee and Bangladesh Taka. Soon after Bangladesh independence in 1971, One US Dollar parity was set at 7.86 B Taka, Indian Rupee 7.46 and Pak Rupee was 4.76. In 1981 PKR was 9.9, INR 8.65 and BDT 18.31. In 1991 PKR was 23.80, INR was 22.74 and BDT 36.75. In 2001, PKR were 61.92, INR 47.19 and BDT 53.84. In 2005 PKR was 59.50, INR 44.10 and BDT 60. In 2009, PKR was 81.20, INR 44.40 and BDT 67.40. In 2012, PKR was 93.40, INR 53.44 and BDT 81.64. And as of September 16, One USD would fetch PKR 104.37, INR 66.40 and 78.13.

    Now, do the calculation and compare for yourselves. You will find that Pak Rupee is the worst performing currency. History suggests that our exporters always enjoyed the best of facilities in shape of easy loans, avail refinancing facility, enjoy subsidy and yet failed to deliver. Our exports in last 6 years have been extremely disappointing and are a major cause of economic mess. Recommend

  • Hilmi
    Jan 13, 2016 - 12:09PM

    My god he’s against privatization of PIA? What use is PIA in government hands? It doesn’t benefit the vast majority of the populace.Recommend

  • Parvez
    Jan 13, 2016 - 2:18PM

    Exports are down….because of government corruption and bad, bad policy making where cost of production is not addressed.Recommend

  • Naresh
    Jan 14, 2016 - 3:12AM

    @asad rizvi: Dr.Pasha’s statement that depreciation of Rupee is the cause of fall in Exports makes little sense, as I find it misleading and hence, would misguide the readers and I would like to respond with facts. …………
    Please note that from the time of Partition on 15th August to 1955-1956 the Pakistani Rupee was PKR 3.30 against the US Dollar. During that Period the Indian Rupee was 4.76 against the US Dollar.

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