The Pakistan Industrial and Traders Association Front (PIAF) said on Saturday that the rupee traded with volatility against the dollar and other major currencies.
In a joint statement issued here, PIAF Senior Vice President, Nasser Hameed and Vice President Javed Siddiqui said the sharp fall in the value of the rupee continued to hurt the economy, as the rupee witnessed a steep fall against the greenback.
Nasir Hameed observed that apart from increasing exports and controlling imports, the government would have to take administrative measures, as the market was witnessing a huge demand for cash dollars.
He said that economic policy making has completely collapsed, as the country’s fiscal policy has become subservient to monetary and exchange rate policies.
PIAF senior vice president said monetary tightening and exchange rate depreciation resulted in higher inflation, increased public debt and debt servicing. He said that empirical evidence shows that one per cent monetary tightening increased inflationary pressures by 1.3 per cent in the case of Pakistan.
He said the US dollar continued to rise against the rupee, hitting record highs in interbank trade amid rising current account deficit. “The government needs to devise a strategy on a war footing to increase foreign investment in Pakistan so that the dollar rally can be stopped,” he said.
Javed Siddiqui urged the government to control the volatility of the rupee against the US dollar, as industrial revival and economic development is not possible without the stability of the local currency. He said the massive devaluation of the currency fueled inflationary pressures, adding that two major factors contributed to the price rise.
“First, fuel prices skyrocketed along with food and commodity prices in the international market, and second, a 30 per cent fall in the exchange rate also pushed up inflation,” he said.
It is to be noted that after four days of losing value, the Pakistani rupee reversed its trajectory and registered marginal gains against the US dollar, appreciating 0.14% in the inter-bank market over the weekend.
According to the State Bank of Pakistan (SBP), the rupee closed at 186.70 after gaining 27 paise or 0.14% on a day-to-day basis. However, the currency has still lost 2.76% of its value this week.
The local currency has depreciated by over 17% against the dollar and over 14% during the current fiscal year since achieving its most recent high on May 14, 2021.
Oil prices, a key determinant of currency parity, came under pressure from weak global growth, higher interest rates and the prospect of a COVID-19 lockdown in China, even as the EU considers sanctions on Russian oil. which will further strengthen the supply.
Brent crude was down 76 cents, or 0.7%, at $107.57 a barrel, while US West Texas Intermediate (WTI) crude was down 32 cents, or 0.3%, at $103.47.
The correction in the value of rupee has come after the intervention of the central bank,” said experts.
PIAF officials said the rupee has been under pressure on the International Monetary Fund (IMF) programme, which is widely considered to be critical for stabilizing Pakistan’s markets. Pakistan is currently in talks with the IMF for the revival of a $6 billion Extended Funds Facility (EFF), a program that was put on hold with a change in government.
He hopes the meeting with the IMF will bring positive news, as oil prices are very high, and the balance of payments is under pressure.—INP