LAHORE: The rupee has hit a new record low at 141 to the US dollar in the inter-bank market, speculations are that Pakistan had agreed with the IMF to let the currency depreciate ahead of a bailout.
The Pakistan Industrial and Traders Associations Front (PIAF) has warned if the cost of production does not get lower and equivalent to the competitors in the neighboring countries, any further depreciation in rupee would not yield the desired impact on the enhancing exports.
Former chairman PIAF, Irfan Iqbal Sheikh observed that over 15 countries in the world had devalued their currency but had failed to attain any benefit from this approach. He included, “We will have to match everything with them, from currency appreciation and depreciation to cost of production.
He said that with a fresh drop of Rs. 0.75, the rupee has cumulatively shed Rs. 1.75 to the greenback in the past two weeks. The rupee lost value despite the Ministry of Finance’s announcement that China would deposit $2.1 billion in the SBP’s foreign currency reserves.
Apart from this, Malaysia was to sign agreements for investment of around $800 million in Pakistan but the balance of payments stability should be ensured with the fall in current account deficit and more-than-adequate availability of foreign financing.
Irfan Iqbal, who is also former SVP of LCCI, said Pakistan’s trade deficit is increasing badly. It needs to increase its exports. He added that the rates of utilities; including electricity and gas, labour, raw material, port and other expenses were higher in Pakistan as compared to neighboring countries in the competition.
Chairman PIAF Mian Nauman Kabir also confirmed that Pakistan’s utility charges are higher in the region. He said that billions of rupees of exporters were stuck with the government as sales tax rebates and others but the government was not serious to pay them back.
Kabir said that Finance Minister Asad Umer announced clearance of rebates, which have not been cleared so far. Although pressure also mounted on Pakistan after a decline in its exports, “the government was bound not to devalue it under an agreement with the IMF. Government cannot devalue the rupee, but it uses some tools to control or unblock the depreciation and appreciation” , he added.
Mian Nauman Kabir argued that any depreciation in the rupee would not have any impact on exports, as history shows exports were not increased. He further suggested that instead of removing tools to depreciate the rupee, the government should rebate the exporters in utility charges and give them sales tax rebates that would encourage them for more exports.
Besides, the government needs to work out to bring the outgoing foreign investment back in the country. (INP)
