KARACHI: Business community has said the weakening currency has impacted the consumers’ purchasing power as devaluation hikes inflation. Vice President of Pakistan Businesses Forum (PBF) Ahmad Jawad said: ‘One hundred twenty three Pakistani rupees were against one US dollar in August 2018 and it was Rs 182.30 against the US dollar by March 29th 2022’.
The government mishandled the devaluation issue and now the US dollar has become even stronger. He said 32 percent devaluation of Pakistani rupee against dollar came in the last 3.7 years of the incumbent government. It is need of the hour that Parliament should intervene and may summon Governor State Bank and seek concrete explanation from him on unjustified devaluation, said talking to Business Recorder.
He said one must understand that along with devaluation, there would be inflation, and when there is inflation, your disposable income goes down, which affects consumption behaviour and spending power. There is a decline in aggregate demand, which is why there is an economic slowdown.
Ahmad Jawad said our monetary policy may affects day-to-day life of common man which includes its effects on poverty, inequality and other social outcomes. He said SBP; therefore, needs to assess, consider and communicate the side effects of ongoing monetary policy to the public for a greater transparency, as well as to the government in order to align fiscal and regulatory policies to counter these unintended consequences.
Today State Bank of Pakistan reserves stand around at 16 billion dollars, besides getting loan from IMF, Chinese debt is going to be rescheduled but still the exchange rate is at Rs182 against one dollar, he said. Even current account deficit shrinks to $0.5bn, but still the country’s economic team is forced for depreciation by international donors, he said, adding this depreciation of Pakistani rupee is nothing related to the fundamentals, but its one of the international agendas to weak Pakistan economically, as a strong currency may impact the country economic outlook.
“Now, Parliament of this country should understand where we are heading in term of valuation of Pakistani rupee? The appreciation of the rupee is inevitable for the country. Until and unless we can’t do it, we will remain in the viscous circle of the inflation and suffer from the skyrocket rates of every commodity from automobiles to food items”.
Similarly in automobiles sector deprecation supported much of the country automobile players. They increased their prices of about 72% regardless their assembly plants in Pakistan. Only few parts have to be imported.
Ahmed regretted that the rates of life saving medicines had also been raised. Even the prices of Active Pharmaceutical Ingredient (API) of the common medicine, which is imported from China over the past years owning to rupee depreciation, have increased manifolds.
He viewed that the recent devaluation of the Pakistani currency was dictated by the IMF through ‘prior actions’ and it has nothing to do with macroeconomic fundamentals.
However the regional currencies versus the US dollar shows that the Pakistani currency experienced massive depreciation compared to others, he said. The Indian rupee stands at 75.39 against a US dollar. The Indian rupee stood at Rs70.09 against the US dollar in 2018, Rs73.66 in December 2019, Rs74.53 in March 2020 and Rs74.57 in April 2021.
In the case of Bangladesh, the Bangladeshi Taka stood at 85.76 against the US dollar and it stood around 84 to 85.9 on average over the last two years.
Even during the Musharraf-Shaukat Aziz regime between 1999 and 2007, the country’s currency remained largely stable and hovered around Rs60 against a US dollar. When the PPP-led regime came to power in 2008, the rupee depreciated as a result of a rising current account deficit and slide to Rs80 just in a few months.
Then, the rupee further adjusted against the dollar in a gradual manner after Pakistan joined the IMF program and remained around Rs90 against the US dollar from 2008 to 2013. In June 2013, the currency stood at Rs98.5 against the US dollar.
Then, the PML-N came to power in 2013. In November 2013, the Pakistani currency stood at Rs107.5 against the US dollar. Former finance minister Ishaq Dar’s policies brought the rupee down to an average rate of Rs98 against the US dollar in June 2014.
The Pakistani rupee remained stable at Rs100 in August 2014 while it adjusted slightly and settled at Rs105 against the US dollar in 2015-16 and 2016-17. Then, former finance minister Miftah Ismail allowed adjustment of the rupee against the dollar and it nosedived to Rs118 against US dollar in June 2018 on the pressure of the big houses. He said I still remember former Finance Minister Ishaq Dar always turned down the depreciation request when Federation of Chambers requested and he stated “it’s a mother of all evils and if I go for depreciation it never comes back.” Now what’s worse in this entire state is that no one is willing to take the responsibility and take concrete measures to counter the situation; he concluded.
However, Korangi Association of Trade and Industry (KATI) expressed concerns over a record rise in US dollar prices
KATI President Salman Aslam, e expressing concern over the high level of dollar in the open market and inter-bank market, said that the value of dollar has reached a record high in the history of the country.
This is a matter of great concern to the local industrial production circles. “Ukraine’s protracted war and rising oil prices have hurt our exchange rates, while our foreign exchange reserves are dwindling,” he said.
Salman Aslam said that for the first time in the history of the country, the dollar crossed the figure of 182 rupees. He said that rising dollar prices of raw materials and other commodities used in industries would lead to increase in cost of locally produced goods which would lead to increase in inflation and unemployment. The e-sector will also be severely affected.
President KATI said that the increase in prices due to supply and demand is not justified. If the demand for dollar increases, the value of dollar may increase but the increase in supply does not show any decrease in prices which is a matter of concern.
He said that the dollar could be allowed to float freely in the market to some extent. He said that the prices of raw materials have also gone up while the industrialists are facing difficulties in fulfilling their import orders.
Salman Aslam appealed to the people to keep the dollar stable for economic stability, for which the government should take all possible steps to appreciate the Pakistani rupee.
Copyright Business Recorder, 2022