The Pakistan Industrial and Traders Association Front (PIAF) has warned the government of incessant surge in trade deficit, keeping the local currency under pressure, which has continued its depreciating trend against the US dollar, diving past the 200 per dollar mark.
This was in part down to lack of clarity on the International Monetary Fund (IMF) front and looming political and economic uncertainty and is a new all-time low for the currency. Senior Vice Chairman of PIAF, Nasir Hameed and Vice Chairman Javed Siddiqi urged the government to control volatility of rupee against the US dollar, which is not possible without keeping a check on soaring trade deficit, putting the industrial revival and economic growth at risk.
Nasir Hameed stated that the rupee fell as low as 201 per dollar in intra-day trading but market anticipation of positive news related to resumption of the IMF programme helped it recover marginally. Talks between the global lender and Pakistan are underway to revive a $6 billion bailout programme, which is expected to provide a cushion to the dwindling economy and falling rupee. But the foreign exchange market appeared to brush off this update as well as strong current account data for the month of April 2022, and the downtrend in the local currency persisted. The local currency has been falling since April 30 as panic over depleting foreign exchange reserves, suspension of the IMF programme and continuation of fuel subsidy eroded market confidence. The foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased by $145 million between May 6 to May 13 to stand at $10.16 billion, with the level staying at less than 1.5 months of import cover.
He said that the sole reason behind the current rupee fall was economic and political uncertainty. “If the rupee is still on a decline despite a robust current account number, then it is only due to turbulence in the economy,” he said. “There is a lot of confusion and this is expected to affect the IMF talks.” —INP
