Govt not acting as rupee fall continues

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LAHORE - The business community, especially commercial importers, have urged the government to control surge of dollar against rupee, as local currency depreciation in last couple of days has inflicted heavy losses on the national economy and cost of deals done by the businessmen with their foreign counterparts has jumped manifold.

Currency experts expressed surprise over sudden appreciation of dollar even in Ramazan since overseas Pakistanis traditionally send Zakat and other funds for charity. They said despite higher remittances, dollar is short in the market.


Currency dealers in the inter-bank market said the State Bank should immediately take notice of the situation which is causing panic in the currency market.


They said that inter-bank market did not receive any support from the central bank to stop free fall of the local currency.


Market experts said even news about agreement with the IMF for over $5 billion loans provided no respite to the rupee. LCCI President Farooq Iftikhar said that the widening current account deficit, excessive government borrowing, absence of foreign flows increasing oil imports, lack of foreign investment and repayments to the International Monetary Fund are the vital reasons for constant depreciation of Pak rupee.


On the other hand, supply is created by exporters bringing in more dollars from their revenues, Overseas Pakistanis remitting more funds and foreign investment. He said that in Pakistan, the foreign investor is shy because of law and order situation, industrial activity has gone down and thus there are lesser exports and more reliance on imports to meet the demand, he said.


Noted commercial importer and FPCCI managing committee member Usman Ghani said that higher oil prices are another significant factor in putting pressure on the rupee. Once a trend is set, speculators tend to punt against the rupee adding further to the bearish tone of the currency.


He pointed out that the State Bank and the government does need to intervene and come up with policy reforms to control depreciation of rupee which is becoming more and more valueless.


“Presently, Pakistan’s 60 per cent import is from China, excluding oil from import bill, and Pakistan can resist this freefall of rupee by starting trade in local currency with trade partners, including China, he suggested.


“It is unfortunate that Islamabad had announced to start its financial transaction with China under currency swap agreement in March 2013 aiming at controlling its import bill and balance of payment, but no implementation is seen so far.”


Usman recalled that governor of State Bank of Pakistan also committed that the currency swap agreement of Pakistan with Turkey, Iran and Afghanistan would also be done.


Pakistan, which has potential to grow by 6 to 7 percent annually, has been in talks with a third country regarding currency swap for along time, but nothing was implemented except signing of MoUs, he pointed out, Usman Added.


“Actions of the PML-N government are not new and nothing is different of what was happening in past govt of the PPP. Only faces have been changed, federal secretaries have been reshuffled and no strategy or solid plan is seen for restructuring of the institutions,” observed APBF chairman Nabeel Hashmi.


He feared that if notice of the situation was not taken immediately, rupee would go further down within next few days, as demand of dollars may be created by importers requiring more dollars to pay for, foreigners withdrawing their investments and taking the dollars outside.


APBF President Rashid Mehr observed that causes of depreciation of a currency are multiple which in combination push and pull the respective currency’s quotation in conjunction with other currency. If there is more demand for dollars in Pakistan than the supply, Rupee would depreciate.


So, the government should take steps to commence trade between Pakistan and China in local currencies with special emphasis on greater Chinese investment in Pakistan’s lagging value-addition economic activities for making meaningful improvement in bilateral trade balance.


It will also reduce Pakistan’s heavy dependence on US dollar-dominated trade while the move may also strengthen Pakistan rupee against the greenback, he added.




Courtesy:  Nation


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