'Artificial control' keeps dollar overvalued by Rs20

Business forum argues dollar rate should be Rs260 that will reduce debt and inflation

LAHORE:

The Pakistan Business Forum (PBF) has urged Prime Minister Shehbaz Sharif to address the artificial control over currency exchange rate, asserting that the current dollar value is being kept deliberately high.

Economic indicators suggest that fair value of the dollar should be around Rs260, it said.

In a statement, PBF Chief Organiser Ahmad Jawad called on the premier to take immediate notice of the situation as a correction of even Rs20 in the rupee value could significantly reduce both public debt and inflation. He pointed out that historically Pakistan had failed to restore true value of the rupee after depreciation, which resulted in long-term instability.

The forum noted that the current exchange rate of Rs283 to a dollar was unsustainable for the economy. "A meaningful economic relief can only be achieved if the rupee stabilises."

Jawad pointed out that inflation, measured by the Consumer Price Index (CPI), had dropped to around 3%, making the current 11% interest rate unjustifiable. The PBF stressed that the upcoming monetary policy, scheduled for July 30, should bring the interest rate down to at least 9%.

It added that the government was paying 11% interest on domestic debt totalling Rs50 trillion, which was 5-6% higher than the current inflation rate. "This discrepancy imposes an annual burden of approximately Rs3 trillion on the national exchequer, which can otherwise be used for public welfare and infrastructure development."

Lower interest rates would also boost Pakistan's export potential in global markets, the forum stated, adding that the IMF itself recommended that interest rates be kept closer to the prevailing inflation rate.

The PBF underlined the need for diversifying Pakistan's export base beyond textile and advocated the search for new industries and markets. Additionally, the State Bank of Pakistan should ensure access to credit for the business community in Balochistan in the upcoming monetary policy.

Jawad concluded his remarks through expressing concern over growing frustration among the business community due to the lack of attention to challenges faced by the productive sectors. He expressed hope that the Monetary Policy Committee would adopt a growth-friendly and pragmatic approach in its upcoming meeting.