As the recent local currency depreciation has inflicted great loss to the national economy and cost of deals done by the businessmen with their foreign counterparts have jumped manifold, the All Pakistan Business Forum (APBF) has urged the government to control surge of dollar against rupee,.
APBF president Ibrahim Qureshi observed that the widening current account deficit, excessive government borrowing, absence of foreign flows increasing oil imports and lack of foreign investment are the vital reasons for the sudden depreciation of Pak rupee.
Pakistan’s rupee was overvalued by at least 20 percent and has a negative impact on the country’s exports. The local currency last week dropped the most in nine years amid rumours of devaluation due to surging trade deficit and shrinking exports of the country. The rupee hit its lowest level since 2013 by shedding value of more than 3 per cent to 108.1 against the US dollar. The country’s economy came under severe pressure due to surging trade deficit on the back of falling exports and a sharp increase in the import bill.
The trade deficit soared 42 per cent to an all-time high of $30 billion in first 11 months of financial year 2016-17. In May, trade deficit surged 61 percent to $3.465 billion, according to the latest data released by Pakistan Bureau of Statistics. The import bill during July-May 2017 period rose 20.6 percent to $48.54 billion. It is expected to reach over $53 billion this fiscal year. In the 11 months through May, the export dropped from $19.14 billion a year ago to $18.54 billion, putting pressure on the currency.
APBF president said that the devaluation always pushed inflation on higher side and made the common life miserable in past and this seems to be going happen again.
The APBF president observed that causes of depreciation of a currency are multiple which in combination push and pull the respective currency’s quotation in conjunction with other currency. If there is more demand for dollars in Pakistan than the supply, rupee would depreciate. So, the government should take steps to commence trade between Pakistan and China in local currencies with special emphasis on greater Chinese investment in Pakistan’s lagging value-addition economic activities for making meaningful improvement in bilateral trade balance, he added.
He feared that if notice of the situation was not taken immediately, rupee would go further down within next few days, as demand of dollars may be created by importers requiring more dollars to pay for, foreigners withdrawing their investments and taking the dollars outside.
Ibrahim Qureshi said that actions of the government are not new and nothing is different of what was happening in past governments as only faces have been and no strategy or solid plan is seen for restructuring of the institutions.