LAHORE: The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has denounced the government for not keeping a check on foreign exchange market to manage dollar flight, as the rupee’s downward spiral continues, with the total downfall of almost 15% during the past 10 working days.
Businessmen Panel (BMP) Chairman and FPCCI former president Mian Anjum Nisar said that the domestic currency has slumped a fresh 2.64% or Rs6.24 in the inter-bank market day trading as the government does not seem to be serious to settle the issue. He said that the government has also failed to appoint a new governor of the State Bank of Pakistan (SBP), without which dollar hike will not be stopped, violating a law that binds it to appoint the governor within one month.
He said that the latest sharp drop in the rupee is seen after the government reported a five-month high current account deficit at $2.3 billion for the month of June. This took the full year CAD to a second historical high of $17.40 billion in the fiscal year which ended June 30, 2022. The massive surge in CAD was financed through the country’s foreign exchange reserves.
Accordingly, the reserves depleted to a mere six to seven week import cover at $9.3 billion. The rupee has continued to decline along with falling reserves, an analyst said. On the other hand, the resumption of foreign financing is at least four weeks away, as the IMF executive board is scheduled to meet and give final approval for the resumption of its loan programme to Pakistan in late August 2022.
Till then Pakistan has to manage import payments and debt repayments with the available limited forex reserves.
In the meantime, the pressure on the rupee would further increase and political instability will play its role in hammering the local currency.
Lashing out on the government for delaying appointment of SBP governor, he said that the position of central bank governor fell vacant on May 4 after the PML-N led coalition government decided against giving a second term to Dr Reza Baqir. The SBP Act of 1956 says any time when the office of governor is vacant or the governor is incapacitated, the senior most Deputy Governor shall be the acting governor, until the Governor is appointed.
Section 11 (4) of the law says in the event of a vacancy occurring amongst the appointed governor, deputy governors, non-executive directors and external members of the Monetary Policy Committee, an appointment shall be finalised within a period not exceeding 30 days on the occurrence of such vacancy.
But it has been over two months and PM Sharif could not agree on a consensus name due to differences within the PML-N ranks and also with the main ally parties, he said.
Moreover, he observed that dollar continued to appreciate against the rupee also because of the higher current account deficit and burgeoning import bills. Besides increasing exports and controlling imports the government will have to take administrative measures.
Mian Anjum Nisar said that this situation might create unstable economic conditions, generating higher risks, and transforms into low investment while inflation is one of the key sources of uncertainty. The high rate of inflation leaves the nation uncertain about potential investments, he added.
The BMP Chairman stressed the need for taking the economic crisis seriously, asking the authorities to form a board of economic team, including country’s financial and economic experts taking the businessmen onboard to tackle the business community’s issue on day to day basis amid skyrocketing inflation and huge depreciation of rupee against dollar. Pakistan needs to get rid of IMF and increase its reliance on indigenous resources, as borrowing and bailouts has landed the country in a debt trap, he added.
He feared that political climate of the country has become unpredictable due to political uncertainty, reducing the level of investment and affecting the economic growth of the country, suggesting the government as well as the opposition parties to settle issues through talks.
Pakistan is going through a severe economic crisis and unfortunately mainstream political parties have not come up with any effective measures to save the economy, he said.
We are deeply concerned over the government’s unconcerned attitude to deal with the current economic challenges, heightened political uncertainty, steep devaluation of the rupee, ineffective role of the State Bank of Pakistan and unregulated profiteering by banks, he said.
He demanded that the SBP governor be appointed as soon as possible to manage affairs of the central bank.
Copyright Business Recorder, 2022