The Friends of Economic and Business Reforms (FEBR) on Sunday urged the government to control the freefall of the local currency against the US dollar, as rising current account deficit is a serious blow to the exchange rate while the fear of higher demand of dollars further exacerbated with the information of the SBP that the county would need dollars to repay loans.
FEBR President Kashif Anwar was of the view that State Bank of Pakistan will have to remain vigilant in this regard. Besides this, the SBP and the government also need to intervene and come up with policy reforms to control depreciation of rupee which is becoming more and more valueless. He said that it was unfortunate that Pakistan had announced to start its financial transaction with several countries under currency swap agreement some eight years back in 2013 aiming at controlling its import bill and balance of payment, but no implementation is seen so far.
Kashif Anwar said that the end of previous fiscal year with rising current account deficit was a serious blow to the exchange rate while the fear of higher demand of dollars further exacerbated with the information of the SBP that the county would need dollars to repay loans.
He said that the high import bill this year was enough to signal the market that demand of dollar was very high. He said that the rising instability in the region has stirred fear within Pakistan that may hurt the normal economic life in the country, motivating people to buy dollars. At the same time, exports to Afghanistan have come down. LCCI former vice president observed that dollar continued to appreciate against the rupee because of the higher current account deficit and burgeoning import bills. Besides increasing exports and controlling imports the government will have to take administrative measures, as a large demand of cash dollars are seen in the market. Terming rupee depreciation against dollar a mysterious development, he said that continued fall of rupee is not understandable with the fact that there was no fundamental change in the country’s economic indicators.
He observed that the market-based flexible exchange rate system, resilience in remittances and other factors can help contain the current account deficit in a sustainable range of 2-3 percent of GDP in FY22.—INP