Why Pak rupee has hit a century

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ISLAMABAD: The delay in evolving a consensus on the installation of a caretaker set-up and dealing with the International Monetary Fund (IMF) has played havoc with Pakistan’s economy, with the rupee crossing the psychological barrier of Rs100 against the dollar in the wake of the $145.791 million loan instalment repaid to the IMF, sources said. “Another heavy instalment of the outstanding IMF loan will become due on February 26, which will be around $400 million to $420 million depending on the conversion rate of the dollar against the Special Drawing Rights (SDRs),” said an official.

For the first time in the country’s history, the rupee touched Rs100 in the open market against US dollar considering that Islamabad had to pay $145.791 million instalment to the IMF on Monday. When contacted the central bank’s spokesperson said that $145.791 million loan instalment had been paid to the IMF.

“Yes, Pakistan will have to pay another instalment of 275 million SDR to the IMF by the end of ongoing month,” said advisor to finance ministry Rana Assad Amin.

However, sources believe that the ruling coalition has put the economy on the back burner as they refuse to take crucial decisions on the economic front. Everyone sitting in the finance ministry was aware that there was no other option but to seek a fresh loan package from the IMF, but the political leadership failed to take into account the ground realities and emerging crisis on the economic horizon.

“If the government prefers to complete its full term till March 16, 2013, then they will leave the office exactly at a time when a full blown crisis in the shape of exchange rate, inflationary pressures and energy shortages would be at its peak,” said an official source.

The finance ministry is now preparing a realistic economic picture that will be dispatched to the president and prime minister about the bleak prospects of the economy.

The budget deficit stands at 2.6 percent of GDP for the first half of current fiscal year despite getting $1.8 billion breathing space from the US in the shape of Coalition Support Fund (CSF). It is expected that the budget deficit will increase to seven percent of GDP at least on a full year basis by June 30, 2013, mainly due to massive revenue shortfall being faced by the Federal Board of Revenue (FBR) so far.

The FBR had so far collected Rs1,027 billion in the first seven months of current fiscal year against Rs976 billion in the same period of last financial year. The government has fixed a revenue collection target of Rs2,381 billion for 2012-13, which is simply impossible to achieve considering the tax machinery’s performance in the first seven months of the ongoing financial year.

The FBR, sources said, revised downward its tax target from Rs2,381 billion to Rs2,190 billion and if the tax machinery crosses the Rs2,100 billion mark then it should be considered an achievement on part of the FBR.

 

Courtesy: The News


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