ISLAMABAD: The depreciation of Pak rupee by 13.5 percent by Friday in the interbank rate will raise inflation to 35 percent from the January Consumer Price Index of around 25 percent.
This was stated by former finance minister Hafeez Pasha while speaking as a guest in “Paisa Bolta Hai” of Aaj News with Anjum Ibrahim.
Pasha cautioned that in case the IMF programme was not revived, inflation could easily go up from between 65 to 70 percent. He revealed that inflation research conducted by his students noted that a 10 percent depreciation of the rupee raises inflation by 2 percent.
Pasha projected that the current ongoing rupee depreciation could add 5 percent to inflation whereas another 5 percent would be due to increase in electricity, gas tariffs, as well as, petroleum levy, the imposition of GST on petroleum products and other taxation measures.
Pasha, when explicitly asked to estimate the rate at which the rupee would find parity with the dollar, refused on the grounds that it may trigger off negative market sentiments.
Former finance minister defined the control over the interbank rate as a ’bizarre’ policy contributing to severe dollar liquidity issues, adding that this policy led to a loss of $4-5 billion to foreign exchange earnings and generating additional liabilities on:(i) the $4 to 5 billion worth of goods stuck at containers; and (ii) on not releasing $2.5 billion payment due on services including payments for airlines, IT companies and repatriation of profits of multinational companies.
Copyright Business Recorder, 2023