LAHORE - The Lahore Chamber of Commerce and Industry Saturday feared that the economy would further slip down owing to continuous unchecked rise in dollar price against the rupee.

“The State Bank of Pakistan should take stringent measures to curb the undesirable outflow of dollar by limiting foreign currency carrying, directing exchange companies to ensure biometric verification for all foreign currency sales and trade in local currencies with bordering countries”, LCCI President Mian Nauman Kabir, Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq said in a statement.

They added that exorbitant devaluation is taking place as the inter-bank dollar rate has plunged to Rs 192.52 as on May 13th 2022. This essentially means that a devaluation of around 6% has taken place in the last one month only.

The LCCI office-bearers said that the main cause of the devaluation in recent times has been the political uncertainty, rise in global crude oil prices and a burgeoning trade deficit which has surpassed 39 billion dollars in the first 10 months of the current financial year.

They said that since our industry heavily relies on imports of raw materials, components and machinery, this devaluation has resulted in an increase in the cost of production. The new government should take all possible measures to strengthen the local currency. There needs to be a renewed focus on import substitution and enhancing exports besides creating an environment of political stability. The imports of non-essential and luxury items should be curtailed.

LCCI President Mian Nauman Kabir said that trade in local currencies, particularly with China, will help Pakistan to end the burden of relying on USD in bilateral trade and to bring down the trade deficit. The LCCI office-bearers said that Pakistan’s mutual trade volume only with China is more than USD 13 billion and if the country makes currency swap agreements with regional countries in general and with China in particular, it will significantly lift pressure off the foreign exchange reserves and dependency on the dollar will be decreased. The LCCI office-bearers said that historic devaluation in Pak-rupee has been recorded against the USD during the ongoing financial year. They said that the trade deficit is one of the major reasons for rupee devaluation.

They said that the currency swap agreements with regional countries will help make Pakistani currency stronger as weak Pak-rupee against the USD has become a serious matter of concern for the economy. They said that Pak-rupee devaluation has made the imports of raw materials and other necessities for the industrial sector more costly. The LCCI office-bearers said that a stable currency is crucial to achieve real economic growth. They said that unfortunately, the Pakistani rupee is continuously falling against the dollar which has had negative impacts on the national economy. “When currency is losing its value and has a weaker outlook, not only foreign investors would stop coming in but the local investors would also hesitate to put in their capital in new ventures”, they added.

They said that currency devaluation always leads to lower industrial productivity as the imports go more expensive, rise in inflation, exporters have less incentives to cut production cost, reduce the purchasing power of the common man, rise in import bill and will pose serious challenges for the economy.