A money changer counts Pakistani Rupee notes in Karachi. PHOTO: REUTERS
While announcing to launch a probe to find out the reasons behind such an irrational move, Dar said that the federal government did not change its foreign exchange policy. He made it clear that the pre-slide value of Rs104.90 per US dollar was the ‘real value’ of the Pakistani currency.
Finance Minister was speaking to media after holding a meeting with heads of two-dozen financial institutions who had been called in Islamabad to dig out the reasons behind the sudden slide of rupee in the interbank on Wednesday.
“The Rs3.50 devaluation in a single day was a unique accident of our history – and was an attempt to give an artificial setback to the economy,” said Dar while showing his disappointment. “Nobody can be jack of all trades,” the minister said while disapproving the unilateral move of the acting governor.
Dar said that the “turmoil in the currency market was the result of the information communication gap”. But the market has adjusted it as the rupee value was again back to Rs105.50 in the interbank trading on Thursday, he added.
At the close of the day, the rupee value in the interbank stood at Rs106.50 to a dollar, as there are reports that the government may eventually allow up to 1.5 per cent depreciation.
Dar also rectified his earlier statement that he gave on Wednesday when he claimed that current political instability could be behind rupee deprecation. The political instability was not the reason behind the slide of Pakistani rupee, as it was the result of an individual act.
Worst one-day fall for rupee since 2008 as dealers panic
On Wednesday, the rupee had fallen to 108.25 to the greenback in interbank trading – a depreciation of Rs3.35 or 3.2 per cent in a single day that raised alarm bells in the finance ministry.
On Wednesday morning, an individual called the banks and asked them to depreciate the rupee against the US dollar, which was tantamount to damaging the economy, said Dar. While dropping a clear hint that the individual was Acting Governor SBP Riaz Riazuddin, Dar said even the other deputy governor SBP was not aware of the decision.
The government had given the acting charge of Governor SBP to Riaz Riazuddin after Ashraf Wathra completed his three-year term on April 28.
It was for the first time that the federal government publicly accused a sitting governor of playing games with economy. It is yet to be seen whether Riaz Riazuddin would prefer to continue as deputy governor after appointment of a new governor in light of Finance Minister Ishaq Dar’s mistrust on him.
The SBP Chief Spokesman Abid Qamar did not respond to a question whether Riaz Riazuddin would continue after the distrust showed by the finance minister.
Dar also announced that a competent person with integrity will be appointed to head the inquiry to be launched to find out the reasons to devalue the rupee. He said that all the interbank transactions would be investigated to find out who got benefited from the rupee devaluation.
Rupee sinks 3.2% against US dollar, Dar and SBP divided over explanation
Dar thanked the bankers who he said accepted the federal government’s position on the value of the currency. He claimed that during the meeting the bankers expressed repentance over Wednesday’s incident.
The finance minister said that even the foreign exchange dealers association called him and said that they were not behind the rupee depreciation.
He also rejected the notion that external account position required rupee depreciation. The minister said that current account financing was the responsibility of the finance ministry that it was fulfilling.
The SBP on Wednesday had also issued a press statement and supported the fall in the value of the rupee. “The current exchange rate is broadly aligned with the economic fundamentals,” SBP said. The IMF Directors called on Pakistan to allow for greater exchange rate flexibility – rather than relying on administrative measures – to help reduce external imbalances and bolster external buffers.
The sudden fall in the value of rupee on Wednesday was the result of political uncertainty and supply-demand gap due to weakening external account, said Saeed Ahmad, President National Bank of Pakistan after the meeting.
He said that the rupee cannot be artificially retained at below Rs105 to a dollar for many years and up to 1.5 per cent depreciation was a natural phenomenon. Saeed Ahmad said that the rupee value should be in the range of Rs105 to Rs107 a dollar.
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