Businessmen concerned over rupee depreciation

Say new inflows have no impact, free float exchange rate a ‘myth’

KARACHI:

Despite receiving a $5 billion inflow before the State Bank of Pakistan (SBP), the value of the rupee continues to depreciate, causing uncertainty in the market. The Pakistan Business Forum (PBF) and industry leaders express concern over the ongoing rupee depreciation and its detrimental effects on the economy.

PBF Central Vice President, Ahmad Jawad questioned the free float exchange rate, asserting that it is merely a myth and not connected to inflows. He believes that weakening a nation’s currency is a straightforward way to destabilise it.

Jawad pointed out that economic problems, including the government’s spending plan deficiency, soaring food inflation, and massive public and energy sector debts, are compounding financial hardships. President of SITE Association of Industries (SAI), Riaz Uddin dismissed talk of a favourable Real Effective Exchange Rate (REER) and stated that the rupee was never stabilising, let alone strengthening based on demand and supply.

The businessmen accused the government of spreading disinformation about the rupee, claiming it would revalue to around 240, while in reality, the currency continues to depreciate.

The SAI president warned that without a survival or economic revival plan, the rupee value will continue to deteriorate in the coming months and years, as highlighted in the IMF’s country report on Pakistan.

Union of Small and Medium Enterprises, President, Zulfikar Thaver pointed out that the IMF’s condition allows the parity rate to be determined based on demand and supply, leaving the official exchange rate to follow the open market rate. However, this constant demand for dollars impacts the rupee’s stability, with industries facing difficulties in clearing imported raw materials. Thaver urged SBP to provide funds for import bills, calls for demurrage and port charge waivers due to importers’ plight. He criticised government’s lack of focus and said the business community is keener to see what the caretaker government has in store for them.

Muhammad Raza, a businessman in Karachi SITE Industrial Area, expressed concerns that the unstable US dollar directly affects industries, and even the SBP is unable to intervene in USD transactions. Despite all major political parties agreeing on fundamental economic policy elements, their pursuit of political mileage overshadows the need for economic stability, causing divergences that hinder progress, said the PBF official.

Published in The Express Tribune, July 21^st, 2023.

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