KARACHI: The consistent depreciation of the rupee is deepening the economic crisis in the country, said the Pakistan Businesses Forum (PBF), and its leaders urged the State Bank of Pakistan (SBP) to take measures to stop market speculation and resolve the issue.
They also suggested that a 15 percent rebate be allowed for a period of one year in the ongoing and scheduled export orders so that the country starts getting foreign exchange and the cycle of industry is continued.
In this regard, PBF Vice President Chaudhry Ahmad Jawad said: “Pakistan’s economy continues to slump despite resumption of the much-awaited International Monetary Fund (IMF) programme. Finance Minister Ishaq Dar must announce a clear policy on the rupee to ease the pain of traders and to save the industries.”
“High inflation, unemployment and low profitability continue to plague the business community and despite that the government has withdrawn the electricity concession given to exporters and is projected to increase the levy on petrol and diesel to Rs50 per litre by January 2023,” he remarked.
“Adding to their miseries, the government is also considering imposing GST – all negative indicators for the country’s economy,” he said. “Even bond and currency markets, which had shown more confidence in Pakistan after the IMF deal, are pricing in high once again over concerns of the country defaulting on its foreign debt.”
Ahmad Jawad’s statement added: “Since the end of August, the yields on some of the government’s international bonds have jumped by a third, while the currency is one of the worst performing in Asia. Is it not shameful for Pakistan that we rejoice in repaying the $1 billion Sukuk, but don’t take any steps to save the dollars we are wasting. Using daylight (timings) will save $3.5 billion.”
The country still has foreign debt of $130 billion and $73 billion that are due in three years, he said. “Our deficit for next three years is a minimum of $20 to $30 billion. Additionally, super inflation is killing the poor. This is a financial emergency.”
The PBF vice president also noted that targets for tax revenues, industrial production and others set by the government have been shredded. “All the figures have gone haywire. Despite all this, the PBF does believe that the real effective exchange rate of the dollar against the rupee is less than Rs200, and that the current depreciation cycle is a direct result of speculative trading, lack of regulatory oversight and mismanagement of the forex market.”
Chairman of the PBF’s Punjab chapter Muhammad Naseer Malik said currently the major problem is to arrange external funding to meet foreign outflows at a time when the SBP reserves are around $7 billion, with an import cover of only 1.1 months against the minimum required standard of three months.
He demanded of the ECC to issue a 15 percent rebate for one year in the ongoing and scheduled export orders so that country starts getting foreign exchange and the cycle of industry is continued.
“Similarly due to the prevailing high yields, the international Sukuk and Eurobond market cannot be tapped, which were earlier targeted at $2 billion. Lastly, the IMF’s ninth review is still pending, which is very critical for the disbursement of $1 billion and will subsequently simplify acquiring additional funding from other multilateral and bilateral lenders.
“For now, however, these uncertainties are building immense pressure on the FX reserves and currency,” he explained.
PBF Chairman for Balochistan Engr Daroo Khan Achakzai said the government needs to focus on the inflow of dollars, particularly via exports and remittances to minimise the current account deficit. “This level of instability and fluctuation in the money market, or this much instability in the political sphere, were never witnessed before. How can anyone inject capital into such an uncertain market?”
PBF’s Central Vice President Jahanara Wattoo also called upon the government to rescue the economy as “there is a limit that businesses can absorb in the form of growing costs and added taxation pressure”. “Pakistan has serious, long-term structural economic problems, and the cost for this year’s devastating floods will be in the tens of billions of dollars. Rebuilding the destroyed infrastructure will be impossible for a country that is already heavily indebted, desperate for an IMF bailout and begging for financial assistance from the world community,” she added.
She suggested that the government consult the business community to find a direction towards better economic solutions together.
Copyright Business Recorder, 2022