Karachi’s business community has asked the government to control the exchange rate because growth in the economy and industry can’t happen without a stable local currency.
In a statement released on Monday, Mian Anjum Nisar, former president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and chairman of the Businessmen Panel (BMP), said in a statement released on Monday that the dollar continued to appreciate against the rupee as a result of the widening current account deficit and rising import costs.
In addition to increasing exports and regulating imports, the government will also have to take administrative steps to meet the high demand for cash dollars on the market.
He said that the steady decline of the rupee against the dollar is hard to understand since the country’s economic indicators haven’t changed much. He called this a strange trend.
The previous president of the FPCCI said that the market-based flexible exchange rate system, the stability of remittances, and other factors may keep the current account deficit in FY22 within a manageable range of 2% to 3% of GDP.
On the interbank market, the rupee lost 0.5% of its value against the dollar because the currency was still under pressure because it wasn’t clear how much money would be coming in or how foreign lenders and friendly countries would help the economy.
On the open market, the price of local currency to buy went down by 50 paisas, but the price to sell stayed the same at 187.
According to the State Bank of Pakistan (SBP), the rupee ended the day at 186.63, down 94 paisas, or 0.50 percent. The rupee ended Saturday, May 7, 2022, at 185.69, a 0.03 percent decrease.
The market saw Pakistan’s macroeconomic statistics and the current negotiations with the International Monetary Fund (IMF) as providing some amount of certainty moving ahead prior to the decline in the currency. However, little to no progress has been made on these fronts since then.
Since May 2021, the value of the dollar against the rupee has gone up by 7.15 percent. This has made imported goods more expensive and made it harder to predict how stable the exchange rate will be.
The dollar was valued at Rs 164 in October 2020 and between Rs 186 and Rs 188 in May 2022.
Nisar said that the State Bank of Pakistan and the Ministry of Finance would need to maintain vigilance with respect to this matter. In addition, the central bank and government must act and implement policy measures to stop the depreciation of the rupee, which is becoming worthless.
He said that it was unfortunate that Pakistan said in 2013 that it would start financial transactions with a number of countries as part of a currency swap arrangement, with the goal of balancing its import bill and balance of payments, but has not yet done so.
While exporters would benefit from their export proceeds, the economy as a whole would struggle due to rising costs, which would eventually have a negative impact on consumption, the engine that drives the economy.
Nisar urged the government to stop the instability of the rupee against the dollar. He said that the State Bank of Pakistan (SBP) does not keep track of the exchange rate and that it is unstable.
The growing current account deficit at the conclusion of the previous fiscal year was a severe blow to the exchange rate, while the SBP’s announcement that the country would require dollars to repay loans compounded the worry of a bigger demand for dollars.
The high import bill this year was enough to signal to the market that the demand for the dollar was extremely high, he said, adding that the rising insecurity in the region has stoked fear in Pakistan that it may harm the country’s normal economic life, motivating the population to purchase dollars. Concurrently, exports to Afghanistan have decreased.
According to Nisar, the massive devaluation of the rupee has continued to harm the national economy, as the cost of transactions between businesspeople and their international counterparts has skyrocketed.
The previous president of the FPCCI said that the main reasons why the rupee keeps going down are that the government borrows too much, there aren’t enough foreign flows, there aren’t enough foreign investments, and there is a huge current account deficit.
The local currency has been under pressure as a result of dropping foreign exchange reserves and rising outflows from international debt obligations, he said, adding that the SBP’s foreign exchange reserves have also been under strain as a result of foreign loan repayments.
