Businessmen call for stable exchange rate

LAHORE: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Businessmen Panel has urged the government to control instability of the rupee against the US dollar, as the greenback has appreciated 7.15 per cent since May this year, hitting 10 months high to cross the Rs164-mark, a statement said on Saturday.

FPCCI’s Businessmen Panel chairman Mian Anjum Nisar said that the industrial expansion and economic growth is not possible without stability of the local currency, as the dollar has been appreciating against the rupee for the last more than 10 months because of the higher current account deficit and burgeoning import bills.

The FPCCI’s former president said 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 per cent to 3 per cent of GDP in FY22.

Since May this year, the dollar has appreciated by 7.15 per cent against the local currency, which lifted the cost of imported products and created uncertainty about the exchange rate stability. The dollar was at Rs164 in October 2020 and now again hovering in the range of Rs164 in August 2021, he added.

Since the beginning of the new financial year, the exchange rate looked shaky, as the local currency lost almost 4 per cent against the US dollar. The market reacted to the policymakers’ announcement about a 2 per cent to 3 per cent current account deficit, while the importers rushed for a higher amount.

He said the trade and industry have no idea as to what is the real exchange rate needed by the central bank and which is the end point for depreciation of the rupee.

Though the exporters would get some benefit against their proceeds but the overall economy would face a tough time, as the cost has been rising and finally it would affect consumption, which is the main wheel to run the economy.

Although the central bank’s foreign exchange reserves are in a better shape, but it has to rely heavily on borrowing to keep it around $18 billion, which affects the local currency value negatively, he said, adding that Pakistan has received record $29.40 billion remittances in the fiscal year 2020/21 and it again received $2.7 billion in July FY22, indicating that the new financial year would also get help larger than the entire exports of the country, which is not long-term solution.

Besides increasing exports and controlling imports, the government will have to take administrative measures, as a large demand for dollars in cash is seen in the market.

Nisar appreciated the positive development related to economic indicators, urging the government to control volatility of the rupee against the US dollar.

He said that the end of the previous fiscal year with the rising current account deficit was a serious blow to the exchange rate, while the fear of higher demand of the dollars further exacerbated with the information from the State Bank of Pakistan that the country would need $20 billion to repay loans.

The import bill of $6 billion in June this year was enough to signal the market that the demand for the dollars was very high, he said, adding that the rising instability in Afghanistan has stirred fear in Pakistan that may hurt the normal economic life, motivating people to buy dollars.

At the same time, exports to Afghanistan have come down to almost zero level. Formal and informal exports to the country are in the range of $1.5 billion to $2 billion/annum, he said, adding that the fourth wave of the Covid-19 is another negative force to depreciate the local currency and shatter the confidence.

Terming the rupee depreciation against the dollar a mysterious development, he said, continued fall in the rupee value is not understandable with the fact that there was no fundamental change in the country’s economic indicators.