Given the existing trend and in the absence of clear policy Pakistan is likely to face serious balance of payment issues from March-April 2018 thus forcing the government to request global lenders to provide financial assistance. This was stated by Dr Ashfaq Hassan Khan while talking to Business Recorder Friday.
Pakistan Readymade Garments Manufacturers and Exporters Association (Prgmea) Central Chairman Ijaz A Khokhar commenting on the issue said that the actual value of Pakistani rupees is around Rs 120 against a dollar and if the present political and economic issues persist for another five to six months, the government will have no option but to ask the World Bank and the International Monetary Fund (IMF) for financial assistance. If the government seeks assistance from international financial institutions the rupee will have to depreciate, he added.
Dr Atiq Rehman Assistant Professor Pakistan Institute of Development Economics (PIDE) stated: "The pressure on Pakistan's external account is increasing steadily. However, the country has sufficient foreign exchange reserves at the moment, with plans by the government to access the international capital markets via Sukuk/bond issue. This means that an official downward adjustment of the exchange rate in the next several months is not imminent."
Dr Atiq added that the current account deficit is projected at around $16-16.5 billion in 2018 with another $7-7.5 billion needed for debt servicing, which takes the total amount of foreign exchange required to be $24 billion; while receivables would be no more than $12.5 billion from several sources.
Currently, the rupee is trading within a tight range of 105.40/45 in the inter-bank market and at 106.60/80 in the open market. Dr Rehman projected that the rupee would trade at 105.55 to a dollar till April 2018 and 105.50 till October next year.
He added that there are two factors that would compel the government to allow the rupee to depreciate. First if the international price of crude continues to rise the pressure on the rupee would mount. And secondly if the government decides to go on an IMF programme and if the Fund this time around, unlike during the three year Extended Fund Facility, decides to make the rupee value more responsive to market conditions a time bound structural benchmark the government would have to depreciate the currency.