Miftah attributes PKR slide to grim political situation

ISLAMABAD: Finance Minister Miftah Ismail on Wednesday said the political situation in the country and not the economic situation caused the depreciation of the rupee against the dollar during the last two days.

Addressing a news conference, the finance minister said he did not see any economic situation that could have led to such a slide in the rupee except political turmoil in the country.

The minister said that there has been no pressure on the rupee due to the trade balance because measures taken by the government, after coming to power, have started paying off and imports were now equal to exports and remittances. Thus, he said that there was no reason for massive depreciation except that the political turmoil contributed to this.

Ismail said that the latest historic high import bill of $80 billion in the last fiscal year exerted pressure on the rupee and the present government has taken a number of measures including the ban on some imports to reduce the quantum of the import bill.

As a result, he said that the non-energy imports reduced by 15% in June 2022; however, the energy imports increased by 120% due to the rising energy prices in the international market.

He further stated that $7.4 billion imports during the last month included $3.7 billion imports of energy and $3.7 billion imports of other commodities but the imports during the 19 days of the current month of July 2022 had declined significantly and remained at $2.6 billion, indicating that by the end of month, imports would be around $5.5 billion against $7.5 billion in the month before, reflecting a decrease of $2 billion. He was hopeful that energy imports would also decline.

Rupee continues to plummet, closes near 225 against US dollar

The finance minister said that as a result of government efforts and measures, imports are likely to be equal to exports and remittances, which would set the fundamentals of trade balance in the right direction.

He said that the International Monetary Fund (IMF) programme is on track and all the conditions have been fulfilled and there would be no hitch in its clearance by the IMF’s Executive Board in August.

The government would implement the agreement with the IMF in its essence dispelled the impression of a prior action on gas price, however, stated there are prior actions regarding electricity price.

The minister said after the IMF agreement, financing from the World Bank and the Asian Development Bank would also open for Pakistan.

About the funding gap of four billion after the WB and the ADB, the finance minister said that Pakistan is expecting $8 billion financing in the current fiscal year which included; (i) $1.2 billion oil financing by a friendly country to be finalized in a few days; (ii) gas on deferred payment of $2.4 billion by another friendly country; (iii) a friendly country has promised $2 billion deposit and while another country has promised over $2 billion SDR;(iv) besides $1 billion a friendly country wanted to invest in Karachi Stock Market for which the matter for G2G mechanism has been sent to the CCLC by the federal cabinet after its approval last week.

The finance minister said that the government is also considering investment in Balloki and Haveli Bahadur Shah power plants.

The finance minister said that the appreciation of the dollar was not specific to Pakistan as it has also been appreciating against other countries as well.

There is resilience in the economy and things are pointing toward the right direction with the LSM showing growth and the government is working to provide incentives to the farmers for an increase in production of wheat. We have allowed import of 0.2 million tonnes of urea and 0.3 million tonnes of wheat, which would take the total imports of wheat to 0.6 million tonnes.

This would help maintain buffer stock for an emergency situation. The finance minister said that the government is also considering G2G import of wheat from Russia.

He admitted that low- and middle-classes were most affected by the increase in the prices of essential commodities but he was optimistic that oil, wheat, and other commodities’ prices are expected to decrease and the inflation would also come down.

He said that if petroleum prices were not increased, the country would have defaulted like Sri Lanka, so he had no choice.

Replying to a question, he said that the governor SBP would be appointed soon and the depreciation of the rupee has nothing to do with the absence of a permanent governor of the SBP. He said the rupee appreciated against other currencies and the depreciation against the dollar was not Pakistan-specific alone.

Copyright Business Recorder, 2022