ISLAMABAD: During first quarter of the current fiscal year, the current account recorded a deficit of $ 3.4 billion compared to a surplus of $ 865 million witnessed in the same period in the last financial year. The dollar recorded a depreciation of 10.3 percent from end of June to mid of November last year, Finance Minister Shaukat Tarin informed the Senate on Friday.
“Rising international commodity (including oil) prices and incremental imports because of import of wheat, sugar and COVID vaccines are major contributors to the current account deficit,” Tarin stated in written reply to Mushtaq Ahmed from Jamaat-e-Islami (JI) during question hour in Senate sitting.
The JI senator asked the finance minister about reasons for current increase in the value of the United States dollar against Pakistani rupee and the steps being taken by the federal government to stabilise/ depreciate rupee against dollar.
The value of rupee has depreciated against the dollar during the current fiscal year from Rs 157.54 per dollar, as of end June 2021, to Rs 175.73 per dollar, as of November 12, 2021, reflecting a depreciation of 10.3 per cent, the finance minister’s written reply read.
This is in contrast to rupee appreciation of 6.7 percent in FY-21, it added. “The movement in PKR is primarily a reflection of the balance of payment position of the country,” Tarin’s reply stated.
“It may be noted that since May 2019, Pakistan has adopted a market-based flexible exchange rate system, where the exchange rate is determined by market demand and supply conditions and trend in the exchange rate is generally a reflection of external balance of payment position of the country. The flexible exchange rate system itself acts as a first line of defence against the external shocks,” Tarin stated in the written reply.
He said the State Bank of Pakistan (SBP) has ‘already and proactively’ taken measures to manage the impact of the rising imports.
“As these measures would help constrain imports, one source of the pressure on the PKR in the FX market would be checked,” he said. These measures include increase in policy interest rates by 0.25 percent in September 2021, he added.
In October 2021, the SBP undertook efforts to curb unnecessary cash FX (foreign exchange) outflows, especially via exchange companies, Tarin said. These include limiting the amount of cash FX that can be purchased by people visiting Afghanistan; biometric verification for all cash FX transactions over $ 500 and use of banking channels for cash FX purchases over $ 10,000, according to finance minister.
In the budget estimated for FY-22, federal government has planned foreign exchange inflows from various multilateral/bilateral sources, he stated, adding that realization of these inflows would improve foreign exchange liquidity in the country and thus support build-up of foreign exchange reserves of the country.
Net revenue collection in 2018-19 was Rs 3.82 trillion, Rs 3.99 trillion in 2019-20 and Rs 4.74 trillion in 2020-21, according to the data shared by the minister in written reply to Mohsin Aziz from Pakistan Tehreek-e-Insaf (PTI) regarding tax collection in last three years.
Later, Senate initiated debate on the Finance Bill (Supplementary) 2021 or mini-budget that was laid in the House on Friday.
JI’s Mushtaq Ahmed termed the mini-budget ‘economic terrorism,’ which, he said, was tantamount to “economic genocide of the people.”
The authority to impose taxes vests in the Parliament, he said. “Why this authority has been handed over to IMF (International Monetary Fund)? The SBP would become a branch of IMF,” he said.
Responding to the JI senator, Parliamentary Affairs State Minister Ali Muhammad Khan said, “The people you are siding with—are the ones responsible for the economic mess Pakistan is in. Zardari is better than them. You should side with him. If you need the company of an honest person then come and join Imran Khan.”
The minister admitted that “there is inflation in the country,” saying, the government is trying to control inflation and provide relief to masses. The inflation rate in Pakistan is 9.8 per cent, he claimed.
Ejaz Chaudhry from PTI said the former governments went to IMF 22 times including nine times by Pakistan People’s Party (PPP) and four times by Pakistan Muslim League Nawaz (PML-N).
PTI’s Faisal Javed Khan said the government provided direct subsidy to 20 million families against inflation.
Chairman Senate Sadiq Sanjrani presided over the Senate sitting.
The House is scheduled to meet again on Monday.
Copyright Business Recorder, 2021