ISLAMABAD: After a botched attempt to let the rupee fall in July last year, and two subsequent rounds of devaluation, Pakistan is unlikely to see its currency weaken further, said Adviser to Prime Minister on Finance Miftah Ismail.
The Pakistani rupee weakened in July for the first time, sending shock waves across the economy before then finance minister Ishaq Dar met with bankers and the central bank to bring back the currency to its previous value.
However, with Dar gone and a widening trade deficit, Pakistan has twice let the rupee fall, cumulatively weakening the currency by over 9% against the US dollar. Experts believe there may be a third round of devaluation as the trade deficit continues to widen, and foreign exchange reserves continue to fall.
But Ismail was adamant the rupee has found it equilibrium.
He said exports are now on an upward trend as they increased 24% year-on-year in March. "I see good things happening right now and I do not see any further need of devaluation," Ismail said in an interview with Bloomberg on Saturday. He is currently in Washington DC to attend the World Bank and International Monetary Fund (IMF) annual spring meetings.
Govt injected $7b to keep rupee overvalued in recent years
"Pakistan had to devalue its currency twice - first in December and then in March - due to the rapidly growing trade deficit.
"Our exports had been going down for the last three years and imports were going up way too fast; trade deficit was too high, therefore it was the right time to devalue our currency," he said. "Luckily, there hasn't been any (substantial pressure) on inflation and it has remained under 4%."
To a question regarding World Bank and Asian Development Bank's (ADB) projection of low GDP growth next year, the adviser said "with new power plants and other economic activities we are confident that we should be able to get 6.25% of GDP growth".
On the other hand, Ismail assured Pakistan will address all reservations of the international community regarding its anti-money laundering laws.
"We will work with the international community, we will work with the FATF and International Cooperation Review Group (ICRG) and implement those reforms completely so that we are out of the grey list as soon as possible," he added.
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