SBP believes rupee is undervalued

Governor hopes currency will touch real value in 2-3 months

KARACHI:

State Bank of Pakistan (SBP) acting Governor Dr Murtaza Syed has announced the formation of a committee and appointment of an SBP’s liaison officer to create close coordination with the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

The committee will interact with the FPCCI for timely addressing grievances of the business community.

He made the remarks while visiting the FPCCI along with the SBP’s senior management comprising Deputy Governors Dr Inayat Hussain and Sima Kamil.

The governor discussed with business leaders the current economic challenges and measures being taken by the government and the SBP. He appreciated the business community for their endurance in the face of challenges posed by the international and domestic events and ensured the SBP’s full support towards addressing their concerns.

He apprised the business body that a staff-level IMF agreement was already in place and the board’s approval was expected in the third week of August as it would meet after vacations.

“SBP believes that the rupee is undervalued at the moment and dollar has overshot in the forex market due to several reasons,” he said. However, he hoped that it would come down to its real value in two to three months. The acting governor invited the business community for a constructive consultative process with the SBP and sought suggestions on the prevailing economic situation, foreign exchange reserves and other related issues.

Syed assured the meeting participants that he would look into the matter of SBP’s prior approval required for the clearance of financial documents of consignments with HS Codes starting with 84 and 85, as the restrictions were affecting the import of tractor parts and other agricultural machinery as well.

Earlier, FPCCI President Irfan Iqbal Sheikh threw light on the current business scenario. He requested the governor to use the policy tools available at the central bank’s disposal to check the speculative dollar trading witnessed over the past few weeks. Sheikh observed that importers, manufacturers and industries were affected the most by the speculative trading and unavailability of dollar as well as shortage of industrial raw material that disrupted the production process.

A senior SBP official highlighted the support extended to the businesses in general and to the exporters in particular. The SBP enhanced the short-term export refinance limit from Rs432 billion to Rs857 billion in the last four years, reflecting an increase of almost 100%.

Likewise, the outstanding stock of the SBP’s long-term fixed-rate financing for exporters (LTFF) has also increased from Rs209 billion to Rs329 billion in the last three years, reflecting a 57% growth.

The apex trade body acknowledged that the Temporary Economic Refinance Facility (TERF) massively helped in stimulating investment and boosting the economy in the backdrop of Covid-19.

Most of the business entities availed TERF at rates far below the maximum cap of 5%. The overwhelming success of TERF indicated that it was successful in filling the gap for long-term investment in the country.

An amount of Rs436 billion had been approved under the facility for 628 businesses.

The SBP management during the meeting comprehensively answered questions raised by FPCCI members and ensured that the senior management of the central bank was always available to listen to their issues and resolve them on priority basis.

Published in The Express Tribune, August 4^th, 2022.

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