The State Bank of Pakistan (SBP) has rebutted claims that capping the price of the dollar caused a loss of $3 billion in remittances and exports.
In a statement issued on Sunday, the central bank said: “Export of goods have been facing headwinds due to moderating demand in international markets as most of our major trading partners are going through a period of monetary tightening.”
Linking the decline in exports to a relatively stable exchange rate is not appropriate:F SBP
Explaining further, it said that the US Federal Funds rate has “surged from 0.25 percent in March 2022 to 4.5 percent to date,” suggesting a noticeable global monetary tightening.
It said that inflation has been significantly higher in the developed world, which has eaten into the purchasing power of consumers.
“These, together with domestic factors like devastating floods and ensuing supply disruptions, have negatively impacted exports.”
Against this backdrop, linking the decline in exports to a relatively stable exchange rate is not appropriate, the SBP statement said.
Explaining the reasons further, it said: “Workers’ remittances were gradually tapering off from the all-time high level of $3.1 billion achieved in April 2022 due to Eid-related flows.”
“This decline is primarily attributed to global economic slowdown as higher inflation in developed countries has led to higher cost of living abroad, thus reducing the surplus funds that could be sent back to the homeland as remittances.
“Moreover, with the resumption of international travel post-COVID, some remittances have switched back to FCY cash transfers via overseas Pakistanis travelling to Pakistan.”
Concluding the explanation, the bank said that the “decline in Pakistan’s exports and remittances is a result of numbers of exogenous factors and domestic reasons.”
“It wouldn’t be appropriate to ascribe it to the exchange rate only,” it stressed.
The SBP’s statements come as reports suggested rupee’s stability in the inter-bank market for several weeks had caused exports and remittances to reduce after the exchange-rate gap in the open and black market rates increased.