SBP must intervene to stabilise rupee, reduce inflation: Motiwala

KARACHI: Businessmen Group (BMG) chairman and former President of the Karachi Chamber of Commerce and Industry (KCCI) Zubair Motiwala expressed concerns over the continuous devaluation of the rupee against the dollar and urged the State Bank of Pakistan to intervene and stop further free-fall of the rupee.

He said the central bank should devise an effective mechanism for stabilising the rupee value to its previous level of Rs150 with a view to reduce the impact of inflation on the common man.

“The Federal Board of Revenue (FBR), which has been taking advantage of higher dollar value, must also be directed to either bring down taxes and duties or keep them charging at the same rate but the calculation for taxes and duties must be done as per the dollar rate of June 2021 when the budget was announced and the dollar was around Rs150, instead of the current rate, which would certainly help in controlling the inflation,” he said, while speaking at a meeting held during the visit of a delegation from the All Pakistan Motorcycle Spare Parts Importers and Dealers Association (APMSPIDA).

The delegation was led by Rehan Hanif. BMG vice chairman Anjum Nisar, KCCI president Muhammad Idrees, senior vice president Abdul Rehman Naqi, vice president Qazi Zahid Hussain, APMSPIDA patron-in-chief Faisal Khalil, former presidents of the KCCI Majyd Aziz, Haroon Agar, Abdullah Zaki, Iftikhar Vohra, Younus Muhammad Bashir, Shamim Ahmed Firpo, Shariq Vohra and others attended the meeting.

The BMG chairman said at the time when the Federal Budget 2021/22 was announced in June 2021, the dollar stood at Rs155 and all the duties and taxes were estimated as per the then dollar rate.

As the dollar after surpassing Rs175 level was still hovering above Rs170, it means that the duties and taxes have also risen sharply, which was the core reason behind fostering the inflation.

He said of the total differential amount of more than Rs15 as the dollar still hovers above Rs170, compared with the previous rate of Rs155 in June 2021, at least 40 per cent of the differential amount i.e., Rs6 on each dollar was silently being collected by the FBR in the shape of taxes and duties, which was highly unfair, as it adds to the cost imported goods and escalates inflation.

A target of Rs5.8 trillion was set for revenue collection for FY21/22 at a time when the dollar rate stood at Rs155; hence, the extra money being collected nowadays due to sharp rise in the dollar rate must not be considered as an achievement by the FBR but as a penalty on the masses and the business community.

It was the FBR, which has been playing a major role in fostering inflation and overburdening the economy, he said.

Motiwala said that due to the rising dollar rate, high cost of doing business, frequent gas outages, deteriorating infrastructure and other civic issues along with a drastic decline in the purchasing power, the local industries have been suffering terribly and facing severe liquidity crunch, which has resulted in limited business activities and it was really unfortunate that the government was not coming up with any workable solution for dealing with all these issues.

Anjum Nisar expressed concerns over the deteriorating economic indicators and said that the economic uncertainty has killed the total business environment, leaving the survival of many businesses at stake in the ongoing era of highest-ever inflation.

“Currency, which is considered as a barometer of any economy, cannot be allowed to fall freely, as it creates a lot of problems not only for the businesses but also for the economy and the common man,” he added.

KCCI president Muhammad Idrees said that the depreciation of the rupee against the dollar and widening trade deficit, if not promptly addressed, would create a nightmare not only for the economy and businesses but also for the common man whose purchasing power has descended sharply.

“[The] dollar rate, which impacts the prices of almost all the household items and raw materials has to be controlled by the SBP, otherwise, the businesses will not be able to stay afloat due to the high cost of doing business, unemployment would rise and the situation may trigger even unrest,” he added.

Rehan Hanif said that the importers and dealers of motorcycle spare parts have been facing a lot of problems, as motorcycle spare parts remain in the 3rd Schedule list, making it mandatory to put MRP (retail price), including the general sales tax (GST) on motorcycle spare parts at the import stage before shipment, which was not possible, keeping in view the diverse range of hundreds and thousands of spare parts.

Moreover, it was a well-known fact that the sales of imported spare parts are made across the country and the freight charges cannot be the same for every city, while the fluctuation in exchange rates was also an issue; hence, it was impossible to calculate MRP in such a varying situation, he added.