Pakistan Industrial and Traders Associations Front has warned that any further depreciation in rupee would not yield the desired impact on enhancing exports, if the cost of production does not get lower and equivalent to the competitors in the neighbouring countries.
The rupee has hit a new record low at 141 to the US dollar in the inter-bank market on speculation that Pakistan had agreed with the IMF to let the currency depreciate ahead of a bailout package, PIAF former Chairman, Irfan Iqbal Sheikh said in a statement on Monday.
He said, "Over 15 countries in the world had devalued their currency but they achieved no benefit from this step. We will have to match everything with them, from currency appreciation and depreciation to cost of production." He said that with a fresh drop of Rs0.75, the rupee has cumulatively shed Rs1.75 to the greenback in the past two weeks. The rupee lost value despite the Ministry of Finance's announcement that China would deposit $2.1 billion in the State Bank's foreign currency reserves.
Apart from that, Malaysia was to sign agreements for investment of around $800 million in Pakistan. He stated that the balance of payments stability should be ensured with the fall in current account deficit and more-than-adequate availability of foreign financing.
Irfan Iqbal, who is also former Senior Vice President of the Lahore Chamber of Commerce and Industry, said Pakistan's trade deficit is increasing badly, where it needs to increase exports. He said rates of utilities; including electricity and gas were higher in Pakistan as compared to neighbouring countries in the competition. Rates of labour, raw material, port and other expenses were also higher in Pakistan.
PIAF Chairman, Mian Nauman Kabir said that Pakistan's utility charges are higher in the region. He said that billions of rupees of exporters were stuck with the government as sales tax rebates and others but the government was not serious to pay them back.
Finance Minister Asad Umer announced clearance of rebates, which have not been cleared so far. Although pressure also mounted on Pakistan after a decline in its exports, government was bound not to devalue it under an agreement with the IMF. "Government cannot devalue the rupee, but it uses some tools to control or unblock the depreciation and appreciation," he said.
He argued that any depreciation in the rupee would not have any impact on exports, as history shows exports were not increased. It will temporarily increase the margins of the exporters. He suggested that instead of removing tools to depreciate the rupee, the government should extend rebate to the exporters in utility charges and give them sales tax rebates that would encourage them for more exports. Besides, the government should work out to bring the outgoing foreign investment back in the country.
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