Lahore/RAWALPINDI - The business community has criticised the government for abrupt plunge of rupee against dollar which was devalued by around 6 percent in early hours of the interbank market to around Rs142, closing at Rs138.50 versus greenback.
According to experts the government has now devalued Rupee by around 22 percent during the current calendar year and 26 percent during the last 12 months.
Lahore Businessmen Front senior vice chairman Sardar Usman Ghani, who is also a major commercial importer, observed that an unchecked and irregular increase in the dollar rates is multiplying the cost of doing business and badly affecting the industrial, manufacturing and agriculture sectors as Pakistan has to import fertilizers, food items, oil, machinery and industrial raw material.
Since the new government has come into power, the local currency is down by 10 percent against dollar during almost 100 days of PTI government, he added.
Sardar Usman said that devaluation of rupee will cause high inflation and halt growth by hitting all the important sectors of economy. He said that dollar price will lead to increase in import costs. He urged the government to ascertain the factors weakening the value of rupee and check the possibilities of undue speculations and panic buying. This will help stabilize rupee and restore the confidence of the business community, he added.
Rice Exporters Association Pakistan senior vice chairman Ali Hussam Asghar said the central bank had kept rupee stable artificially for a long time in the past compared to depreciation of Indian and Sri Lankan currency, respectively, against US dollar. At a time when pro-export measures have failed, Pak rupee needs to be depreciated to gain its actual value to help trade and current account positions, he said.
Ali Hussam said it is worrying that Pakistan’s trade deficit is increasing. He welcomed the State Bank’s stance of market-based devaluation, which was long-awaited. The exchange rate should be based on demand and supply of dollars in the interbank market, he contended. He said it would be more prudent to allow the currency to slide in an orderly fashion towards a fairer valuation without any further intervention.
Lahore Chamber of Commerce & Industry’s former senior vice chairman Khawaja Khawar Rashid urged the State Bank to control rapid surge in dollar price through strict measures otherwise rupee devaluation would give a big blow to the economy.
The apparent devaluation comes at a time when country’s nearly $300 billion economy is showing signs of vulnerability despite surging growth rates in the past.
LCCI President Almas Hyder said that surge in dollar price will badly affect manufacturing sector as raw material price and cost of doing business will go up.
He said that the government should take immediate measures to arrest further devaluation of rupee to avoid more damages to the economy. They said though the weaker rupee benefits the exporters by giving them more rupees per dollar, but this benefit is neutralized by the costly imported inputs of manufacturing sector including textiles thus eroding the financial advantage of a weaker rupee.
Noted financial expert Sohail Ahmed believed this was much needed as Pakistan’s external Current Account Deficit (CAD) remained higher than the expectations. He said Pakistan foreign exchange reserves declined from $9.8b in Jul 2018 to $8b, which is less than 2 months of import cover. This is despite the $1b inflow from Saudi Arabia which the country received last week.
He noted that Pakistan govt held talks with the International Monetary Fund (IMF) for a bailout, where the fund had indicated need for further devaluation in the Pak Rupee as well as hike in interest rates.
He said the Real Effective Exchange Rate (REER) stood at 111 when the Pak Rupee averaged Rs124, which had indicated further need to devalue Pak Rupee.
Likewise, the Rawalpindi Chamber of Commerce and Industry (RCCI) also voiced serious concerns over the sharp fall in the value of Pakistani rupee against the US dollar. Talking to a trade delegation at chamber house on Friday RCCI Acting President Muhammad Badar Haroon said it would open flood gates of inflation in the country and create additional problems for business and industrial activities.
“The dollar has risen to an all-time high of Rs142 and it must be controlled, as it could have a devastating impact on all segments of society, particularly the Small and Medium Enterprises (SMEs),” he added. He said that the fall of rupee in open market from Rs134 per dollar to Rs142 per dollar in a single day should be a cause of great concern for policymakers and monitoring bodies.
He said instead of withdrawing support for the rupee in the daily market, State Bank of Pakistan (SBP) should make efforts for a stable currency as currency volatility is disturbing the long-term business planning efforts of the private sector. Muhammad Badar Haroon said falling value of rupee would increase the debt burden on the country as a Rs1 devaluation causes a Rs60 billion jump in the public debt burden. He stressed that government should take urgent measures to end volatility and bring stability in the local currency.
RCCI president cautioned that It must be kept in mind that the rising dollar would lead to expensive imports and the exporters will also bear the brunt due to rise in cost of imported raw materials, plunging the economy into further deep crisis. “We fear that the rupee may fall further in the coming months, keeping in view Pakistan’s dwindling foreign exchange reserves,” he said. Currency devaluation for a country like Pakistan will have negative economic implications on revival of Auto, Pharmaceutical and Information Technology sectors, he opined. Vice president Fayyaz Qureshi, chamber members Nosherwan Khalil Khan and Afzaal Butt, among others, were also present on the occasion.
SALMAN ABDUHU/ISRAR AHMED