Published On: Fri, May 13th, 2022
Published in Category: Karachi

PBF says rupee has declined significantly below its fair value

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KARACHI : President, Pakistan Businesses Forum (PBF) Mian Usman Zulfiqar said Pakistani currency continuously failed to win support against the US dollar as it surpassed a major barrier of Rs190 against the US dollar for the first time in the inter-bank market mainly owing to political and economic instability in the country.

PBF President said considering the rupee has declined significantly below its fair value; even in the one month rupee depreciated up to Rs 6 which is not good omen for our investors and the economy. “A good budget and its implementation will support economic wellbeing and ease pressure on the rupee.”

He demanded that free float policy should be revisited in a very serious way and may take up in the next meet with the IMF and if it’s going like this dollar will be touch Rs 200 in the next months because trader and market forces have manipulated the situation and getting good profits out of this trading but country suffers.

IMF team now wants to meet a Pakistani team in Doha on 18th May – and that too only once Shahbaz Sharif government ends the subsidies on petrol and diesel. But that would add to the government’s political challenges already not mean by any standard.

Earlier, the IMF team was scheduled to arrive in Pakistan on May 10 to conduct the seventh review of the economy under the ongoing loan programme worth $6 billion.

The government claimed that the amount of loan has been enhanced to $8 billion, while the timeline for completion of the programme has been extended by one year till September 2023.

Pakistan’s expanding import-export balance, crippling debt, rupee’s all-time low nosedive against the US dollar, sky-rocketing inflation, and shrinking reserves are key areas that necessitate immediate attention.

The people already grappling with double-digit inflation, as well as wage and job losses, as macroeconomic indicators decline.

All these indicators led to stagnation of growth and fewer prospects of genuine improvement.

Confronted with these challenges, PM Shahbaz and his team traveled across the world to seek financial leverage from the IMF, Saudi Arabia, and UAE.

Unfortunately, no quick help was available.

Govt sources kept claiming that crown prince, Mohammad Bin Salman, has agreed to provide financial leverage of around US $ 7.4 billion including rollover of previous support of $ 3 billion and deferred oil payments.

Another $ 1-2 billion were expected from UAE.

During Finance Minister Miftah’s trip to Washington, it was claimed that IMF had agreed to add another $2 billion to the current program where the previous PTI govt had only availed $ 3 billion since June 2019 and $ 3 billion were to be received till September 2022.

Even Miftah Ismail had initially demanded a new program from IMF, but sources privy to the developments claim that IMF was not ready for that and instead suggested providing an additional US $ 2 billion in funds.

However, the IMF team that was supposed to arrive in Islamabad on or before 10th May to finalize details has not come and is not arriving at all.

PBF President also told despite of all the given circumstances we have to go for out of box solutions.

He also called upon the Prime Minister of Pakistan that without strengthening the rupee, you will never curtail inflation.

Zulfiqar further opined State Bank of Pakistan may be considering increasing the benchmark interest rate by 150-200 basis points in another emergency meeting to arrest the continuous decline of the rupee.

“The action plan must include completion of the seventh review of Pakistan’s economy with the International Monetary Fund (IMF), restricting import of non-essential items and supporting exporters through extending bank financing,” he said.