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Businessmen ring alarm bell on surging import bill

Businessmen ring alarm bell on surging import bill

Businessmen ring alarm bell on surging import bill

FPCCI Photo: File

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KARACHI: The business community has warned the government of further widening in trade deficit owing to sharp increase in import bill during the first half of the current fiscal year, a statement said on Saturday.

Business Panel chairman Mian Anjum Nisar warned the government of incessant surge in trade deficit, which widened by 106.4 per cent during the first half of the current fiscal year 2021/22, keeping the local currency under pressure, which is back to its depreciating trend against the dollar, after remaining stable for a couple of days.

Nisar, also a former president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), urged the government to control the rupee volatility against the dollar, which is not possible without keeping a check on soaring trade deficit, putting the industrial revival and economic growth at risk.

The trade deficit during the first six months (July-December) reached $25.478 billion, compared to $12.34 billion registered during the same period of 2020/21, he said, adding that last week, the rupee closed at its all-time record low of Rs178.24, against the dollar before appreciating the following two days to end the year at 176.51.

He was of the view that State Bank of Pakistan (SBP) should remain vigilant in this regard, and along with the government needs to intervene and come up with policy reforms to control depreciation of rupee.

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FPCCI’s Businessmen Panel chairman said that apart from increasing exports and keeping a check on imports, the government will have to take administrative measures, as large demands for cash dollars are seen in the market.

He appreciated the fact that the country’s exports increased 24.7 per cent and remained $15.102 billion during the first half of the current fiscal year, noting that the imports also skyrocketed by 65.94 per cent to reach $40.58 billion, which is alarming.

If the increase in imports continues, the rupee depreciating cannot be avoided, he warned and suggested to provide incentives to industry to further rise in exports. If the situation persists, the interest rate could go even higher as the import bill widens, he added.

The rupee depreciation comes despite the SBP’s latest measure in which it amended foreign exchange regulations for exporters. During the week the central bank had announced to reduce the period of export proceeds by 60 days, and the exporters will be required to bring export proceeds within a maximum period of 120 days from date of shipment, but the new measure did not have a positive impact so far, he said.

The SBP is of the view that a flexible exchange rate has appropriately played its role as a shock-absorber and it is important that its role be complemented by strong exports proceed realisation, he added.

This indicates that the pressure on the rupee is consistently increasing, he said, stressing the need to devise a strategy on war-footing to increase foreign investment in Pakistan so as to stop the upward trajectory of the dollar.

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He observed that the market-based flexible exchange rate system, resilience in remittances and other factors can help contain the current account deficit in a sustainable range of 2 to 3 per cent of GDP in FY22.

He said that the rising of the dollar is not logical despite the fact that the State Bank says Pakistan’s external position was at its strongest with 0.6 per cent current account deficit.

He emphasised the need to keep incentivising export-oriented sectors in order to take the exports to the next level, adding that there is no denying the fact that the government has been facing numerous economic challenges besides other internal and external issues and problems during the last three years.

He said that the textile industry has been maintaining top position in exports and is the lifeline of Pakistan’s exports, which would be further increased after the government’s relief to this sector. With the resolution of hampering issues, he hoped the share of exports could go high further in FY21/22.

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