'Rickety' rupee inflicting huge losses on importers, fuelling inflation: Maggo

KARACHI: Mian Nasser Hyatt Maggo, President FPCCI Friday expressed his deep dismay over the incessantly unstable exchange rate which, he said, is causing huge losses to importers of raw materials and commodities besides fuelling inflation.

Maggo added that it is a recipe for disaster to harm any country's export-oriented industries by keeping exchange rate rickety and unstable. Mian Nasser Hyatt Maggo maintained that FPCCI is observing the inaction of the government & SBP, by not supporting the business, industry and trade industry of Pakistan in the wake of unprecedented exchange rate volatility, with profound concern.

Nasir Khan, VP FPCCI, said that the current wave of hyperinflation in food items is the direct consequence of the incompetent handling of exchange rate; otherwise, there would have some stability in the food prices. For example, the edible oils are being sold in the vicinity of Rs.400 per litre currently.

Nasir Khan stated that, on the basis of ground realities, he can say that the dollar can hit Rs. 200 sooner than later; and, that will play a havoc with the economy and general public alike. He stressed that the government should wake up and the Prime Minister of Pakistan should himself monitor the situation on daily basis.

Mian Nasser Hyatt Maggo extended his support and consultancy for stabilizing the exchange rate to put an end to the accumulating losses.

The government needs to come up with an elaborate mechanism to protect the export industry; end uncertainty pertaining to IMF program; make SBP play a proactive role with required competence & integrity; promote barter trade where applicable and facilitate exploration of unconventional import markets & regions, he added.

Pakistan Businesses Forum (PBF) Vice President, Ahmad Jawad has said the attitude was the same, whether we talk about the ministries, state-owned enterprises or the provincial governments.

Despite there being no end to expenses, the focus was never on reviving the agriculture sector, or working on the small and medium enterprises to make them more viable to transform the country's economy in the long run. Thus, instead of building the capacity to pay back the loans, the government continued to borrow to service the previous loans.

He said the historic decrease of rupee against the US dollar was an unprecedented event that was never witnessed before in the 74 years history of Pakistan. From 1947 till 1988, we went to the International Monetary Fund (IMF) four times; however, 1998 onwards, seeking an IMF package became more than a fashion for any government, especially since no government wanted to reduce its expenses.

Nobody can guess where the country is currently headed in terms of the exchange rate. The business community and the masses are in utter confusion as to why the people of Pakistan are compelled to purchase petroleum commodities at the rate of Rs 147 per litre, an unprecedented occurrence. There is no doubt that depreciation of currency is the mother of all evils, and now Pakistanis may have to forget about any substantial recovery in the rupee.

It has been in freefall. The rupee continues to plummet against the US dollar, spreading shockwaves all over the economy. The currency has lost a considerable amount of its value in the last four months.

Falling from 152 to a dollar to the current 175 that the experts are calling this the steepest fall in one span of time in the recorded history since the currency was linked to the dollar in the early 80's.

Jawad said in the last three years that slippages of the rupee have been even more striking. This slump is owing to a slip between the cup and the lip as Pakistan could not retain the stringent regulation on its current account deficit, besides letting imports swell for reasons of developmental proximity.

This has hit the macro-economic indicators too severely and led to the nose-diving of rupee. To further deteriorate this rupee crisis is the revulsion in Afghanistan, which has set the demand for greenback surge to unprecedented limits.

This nervousness of the rupee calls for a comprehensive approach. None are attending to the vicious circle of demand and supply on the western borders, where informal economy is the order of the day. It is estimated that around six million dollars change hands between traders of Pakistan and Afghanistan on a daily basis; the demand inevitably will circumvent Pakistani coffers. This is one of the reasons for the rupee going sluggish.

But still country like Pakistan, with a trade deficit, strong rupee is a boon, not a bane. He said interestingly the State Bank of Pakistan (SBP) governor defended the rupee devaluation, saying it benefited overseas Pakistanis in his recent press talk in Manchester.

"How does it benefit them? Because our brothers and sisters from these countries who send their hard-earned money back home their remittances are increasing."In other words SBP Governor Raza Baqir had "appealed to overseas constituency and tried to sell an inherently unfavourable policy as beneficial.

Copyright Business Recorder, 2021