Pakistan's Finance Minister Asad Umar on Friday ruled out further devaluation of Pak rupee saying the rupee is in equilibrium. He urged people to invest in the stock market and not waste money buying dollars. Speaking at a ceremony of formal trading of newly listed company Interloop Limited through a video link from Islamabad, the finance minister quoted a statement of State Bank of Pakistan (SBP) which, according to him, says that the rupee is in equilibrium.
He also clarified that the International Monetary Fund (IMF) has not made any demand to devalue Pak rupee. He said there is no need and no reason for devaluation of Pak rupee. He said rumours about currency devaluation must come to an end. He said in past the governments artificially kept rupee overvalued because of which country's economy suffered losses. He said the Real Effective Exchange Rate (REER) in January 2018 was Rs 127.
The finance minister said that Pakistan is an economy of $300-350 billion as compared to $70 trillion world economy.
He said the present government has taken various difficult decisions in the larger interest of the country.
Asad Umer asked people not to 'waste' money through investing in dollars. He advised to invest in stock market. He said stock market is very attractive for investment in terms of P/E multiples.
He said the government will introduce various measures in the next budget that would help project capital market to historical high. He said Pakistan's stock market is well regulated. He said his government has taken tough decisions to make Pakistan a part of the world economy.
The finance minister said that the country's documented economy size is around $300-350 billion and it has to be part of the $70 trillion world economy.
Earlier, the formal trading in the shares of newly listed company Interloop Limited started at a gong ceremony held at main trading hall of the PSX.
Reuters adds: Since coming to power in August, much of the government's focus has been in staving off a balance of payments crisis. It is in talks with the International Monetary Fund over a 13th bailout since the 1980s which is expected in the next few weeks.
Consumer price inflation rose in March to its highest since November 2013. Energy costs in particular have risen sharply, hit by a series of a devaluations.
"Today, State Bank of Pakistan has given a categorical statement that rupee is in equilibrium. Central bank cannot speak clearer than this," Finance Minister Asad Umar told a business gathering at the Pakistan Stock Exchange in Karachi through a video link.
"There is no reason for big devaluations."
He added that there were no demands for what the exchange rate should be in the talks with the IMF.
"In the IMF talks, let me clarify that it is not even a demand by them what should be the dollar exchange rate," Umar told reporters later in Islamabad. "Yes, there is a discussion about what should be the exchange rate management."
Traditionally, Pakistan has kept its exchange rate over-valued, incurring losses to the economy, the minister said. The rupee should be aligned with its fundamentals and its benchmark should be the real effective exchange rate (REER), he added.
The minister advised people not to waste money buying dollars, but instead invest in the stock market.
"One should not say the rupee would comfortably become stable or inflexible in terms of movement. It will remain flexible, but one should not expect big devaluation," Fawad Khan, head of Research at BMA Capital Management Limited, told Reuters.
The minister's remarks would help bring stability, Khan said.
"Overall, the statement has been taken positively by the equity market," he told Reuters.
The question of whether the finance minister should have given this statement or not was another issue, Khan said, because the management of the exchange rate is the joint responsibility of the ministry of finance and the central bank.
Umar said the IMF bailout would likely be finalised in meetings with the lender and the World Bank next week.
"My estimate is that in those meetings as we have come very close it is almost done, in principle," he said. "God willing, it will be close there, and after that we can sign an IMF agreement by inviting their staff mission."
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