Traders seek revised dollar policy

Continued rupee depreciation raises cost of imported raw material, parts

KARACHI:

Businessmen have called upon the government to revisit the free floating dollar policy. The depreciation of the rupee beyond the accepted norms and demand-supply concept remains a matter of urgent concern for the business community.

Korangi Association of Trade and Industry (KATI) President Salman Aslam expressed concern over the price of the dollar exceeding Rs233 in the open market.

He stated that the “price should have been reduced after the country received assistance from the International Monetary Fund (IMF) and other friendly countries on account of stabilisation of foreign exchange reserves and actions of the State Bank”.

“However, after a few days, the value of the dollar started increasing again, which is harmful to the economy. In the current situation, the increase in the value of the dollar shows that smuggling is still ongoing and government measures to remedy this situation are not proving beneficial,” he noted.

“We are witnessing a dollar dilemma,” said Union of Small and Medium Enterprises (Unisame) President Zulfikar Thaver.

“Depreciation of the rupee beyond the accepted norms and the demand-supply concept is causing serious concern. This raises the landed cost of imported raw material and parts and brings into question the feasibility of several units,” he lamented.

“The free floating policy of the dollar should be revised to cope with the challenges of food security after recent floods,” emphasised Pakistan Businesses Forum (PBF) President Usman Zulfiqar.

“The dollar is again rising against the rupee which must be controlled now. This abnormal volatility would create further chaos among the ranks and files of the business community. Despite the resumption of the IMF programme, the local currency remains unstable and weak,” he stated.

“The markets had already factored in the IMF loan facility when the exchange rate strengthened by 10.7% to reach Rs213.9 in inter-bank trade on August 16 from a historic low of nearly Rs240 towards the end of July. It might have sustained that level if Gulf countries had made good on their commitment to provide $4 billion in safe deposits,” he added.

“The main reason for the current predicament is the liberty given to exchange companies who resort to Hundi and Hawala and who also encourage big investors to buy with their undeclared income and sell dollars by pushing the exchange rate for gains,” explained Zulfikar Thaver.

“Secondly, Pakistan is burdened by the heavy buying of Afghan traders who buy dollars from the Pakistani open market and carry out under-invoicing from here. Afghan traders are very active in our markets and instead of buying their foreign exchange requirements from Dubai or other free ports, they indulge in buying from our money exchangers,” he explained.

“The government needs to discourage smuggling of goods from Afghanistan and Iran. Accordingly, they should set up check posts on the routes which would serve as roadblocks for illegal transactions through the borders,” Thaver added.

Usman Zulfiqar noted that “Pakistan’s electricity and gas tariffs for the textile industry remain the highest in the region despite RCET tariffs. The general industrial tariff remains at 0.15USD/KWh, which is twice than that of Vietnam and 1.5 times higher than that of Bangladesh and India. Likewise, Pakistan’s textile industry faces the highest gas/LNG tariff in the region”.

Published in The Express Tribune, September 10^th, 2022.

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