The Lahore Chamber of Commerce & Industry has demanded of the State Bank of Pakistan to control rapid surge in dollar price through strict measures otherwise Pak rupee devaluation will give a big blow to the economy. "Inter-bank US dollar rate is ringing alarming bell and calling for immediate attention of the State Bank of Pakistan to avoid economic crisis. Rupee devaluation is not a good omen for the national economy as external debts are already around $89 billion, exports are stagnant, trade deficit is swelling", LCCI Acting President Khawaja Khawar Rashid and Vice President Zeshan Khalil said in a statement on Tuesday.
They said that after a short span, dollar has once again started to crush the local currency that would reignite high inflation and halt growth by hitting all the important sectors of the economy. "US dollar rate against rupee was Rs 4.76 in 60s, Rs 59.30 in 2005 and touched the new heights during the current financial year. Soaring dollar price led to trade deficit, import costs, hike in POL prices", LCCI office-bearers said. They said that the recent surge in the greenback rate would jack-up the input cost that would hit the export-oriented industries hard.
The SBP needs to ascertain the factors weakening the value of local currency and check the possibilities of undue speculations and malpractices in the operation of foreign exchange markets in Pakistan. This will help stabilize rupee and restore the business community's confidence, they added. They said that an unchecked increase in the dollar rates is multiplying the cost of doing business and badly affecting the industrial, manufacturing and agriculture sectors as Pakistan has to import fertilizers, food items, oil, machinery and industrial raw material.
The government should take immediate measures to arrest further devaluation of rupee to avoid more damaging consequences for the economy, they said. Though the weaker rupee benefits the exporters by giving them more rupees per dollar, but this benefit is neutralized by the costly imported inputs of manufacturing sector including textiles thus eroding the financial advantage of a weaker rupee, they added. They said that the economy was already under tremendous pressure owing to multiple internal and external challenges it has been facing for the last many years. An acute energy shortage and heavy government borrowing is mother of all economic ills they said and added that the government observed a little restraint; the economic situation would have been quite encouraging.
They said that today all sectors of economy are in trouble and a further fall in value of rupee will cause more contraction in economic activities leading to a drastic cut in the tax revenue for government. If the greenback continues its upward flight, it will certainly inflate import bill besides lowering the competitiveness of Pakistan's business and industry. Therefore, the government should get quickly into action to arrest this dangerous trend. They suggested to the government to immediately review its energy plan, introduce institutional reforms and curtail non-development expenditures for the sake of country's economy and its people.