Massive fall in rupee value continues to harm economy, says PIAF

Pakistan Industrial & Traders Associations Front Chairman Mian Nauman Kabir has said that massive fall in rupee value continued to harm the economy, as the cost of deals done by the businessmen with their foreign buyers has increased manifold due to unprecedented plunge of the local currency against the dollar. Besides increasing exports and controlling imports the government will have to take administrative measures, as a large demand for cash dollars is seen in the market. He said that the rupee has dropped by 2.9 percent or Rs4.62 against the dollar during last couple of months. 

Mian Nauman Kabir, in a joint statement with senior vice chairman Nasir Hameed and vice-chairman Javed Siddiqi, appreciated the positive development related to the imports, which have now started decreasing since the last financial year followed by the government's initiative of imposing regulatory duties. 

PIAF Chairman urged the government to control volatility of rupee against the US dollar, as the industrial revival and economic growth is not possible without stability of local currency. 

He said that Pakistani rupee continued its downward slide against the US dollar, moving in record low range of Rs167-168, having no sign of recovery, despite the fact that Pakistan's Current Account Deficit has reduced by 78 percent owing to lower imports and better inflows. 

Nauman Kabir said that the CAD fell to $2.97 billion during fiscal year 2019-20 while the import bill fell by 19 percent to $44.57 billion during this period but rupee continued to sink. He said that sharp depreciation of rupee shows that Pakistan is again moving towards a trade deficit regime, which might jack up the current account deficit yet again. He said that the inflows of workers' remittances also grew by 6.4 percent to $23.12 billion during fiscal year 2019-20 which should have a positive impact on dollar-rupee exchange value. 

He said that Pakistan has received around $500 million in soft loan from the World Bank last month, helping the rupee to maintain its uptrend, besides bridging the shortfall in budgeted expenditures. 

PIAF senior vice chairman Nasir Hameed Khan, terming rupee depreciation against dollar a mysterious development, said that continued fall of rupee is not understandable with the fact that there was no fundamental change in the country's imports during last few months while other economic indicators are also the same for a long time. 

Nasir Hameed said that in dollar value, the gross domestic product (GDP) contracted 5.22% in FY20. The GDP value in terms of dollar does not reflect the growth pattern, as Pakistan measures economic indicators in rupee value and converts it into dollar term. So, the volatility in the rupee-dollar exchange value would lead to a huge difference between GDP growth in dollar value and real growth in rupee term. 

PIAF vice chairman Javed Siddiqi said the foreign direct investment rose 88% to $2.56 billion in the country in FY20, as in June alone, the foreign investment surged 70.53% to $174.8 million, which could help strengthen the rupee and the foreign exchange reserves. 

Javed Siddiqi said that the current account deficit shrank to 1.1% of gross domestic product (GDP) in FY20 and the deficit of $2.96 billion is the lowest in five years which should be appreciated but it is also the fact that the much-needed improvement in the current account deficit was initially achieved by compromising economic growth. Later, the Covid-19 outbreak slowed down the economy further and caused negative growth for the first time in the history.