Federation of Pakistan Chambers of Commerce and Industry (FPCCI) businessmen panel has urged the government to control instability of rupee against the US dollar, as the greenback has appreciated 7.15% since May 2021, touching a 10-month high to cross Rs164 mark.
FPCCI Businessmen Panel Chairman Mian Anjum Nisar observed that industrial expansion and economic growth is not possible without stability of local currency, as the US dollar has been appreciating against the rupee since more than 10 months because of current account deficit and burgeoning import bill.
The market-based flexible exchange rate system, resilience in remittances and other factors can help contain current account deficit in a sustainable range of 2-3% of GDP in fiscal year 2022, he said, adding that rising dollar is not logical despite the fact that the central bank says Pakistan’s external position was at its strongest in 10 years with 0.6% current account deficit in FY21.
Since May 2021, the dollar has appreciated by 7.15% against the local currency which lifted the cost of imported products and created uncertainty about the exchange rate stability, said Pakistan Industrial and Traders Associations Front Chairman Mian Nauman Kabir. “The dollar was at Rs164 in October 2020 and now again hovering in the range of Rs164 in August 2021.” Since the beginning of the new financial year the exchange rate looked shaky as the local currency lost almost 4% against the US dollar. The market reacted over the policymakers’ announcement about 2-3% current account deficit, while the importers rushed for higher amount, he said.
The trade and industry have no idea as to what is the real exchange rate needed by the central bank and which is the end point for depreciation of rupee, said Nisar.
“Although exporters would get some benefit against their export proceeds, the overall economy would face a tough time as the cost has been rising and finally it would affect consumption, which is the main wheel to run the economy,” he added.
Although the central banks’ foreign exchange reserves are in a better shape, but it has to rely heavily on borrowing to keep it at around $18 billion which affects the local currency value negatively, he maintained. Pakistan received record $29.4 billion remittances in fiscal year 2020-21 and it again received $2.7 billion in July FY22, indicating that the new financial year would also get help larger than the entire exports of the country, which is not a long-term solution.
Besides increasing exports and controlling imports, the government will have to take administrative measures as large demand of cash dollars is seen in the market, said FPCCI Senior Vice President Shahzeb Akram. Terming rupee depreciation against the US dollar a mysterious development, Nisar said that continued fall of rupee is not understandable keeping in mind the fact that there was no fundamental change in the country’s economic indicators.
Published in The Express Tribune, August 15th, 2021.
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