LAHORE: In wake of the recent depreciation in the rupee that lasted for a day, apart from losses to the national economy, the cost of deals done by the businessmen with their foreign counterparts have also jumped manifold. In light of this development the All Pakistan Business Forum (APBF) has urged the government to control the surge of dollar against the rupee.
APBF President Ibrahim Qureshi observed that the widening current account deficit, excessive government borrowing, absence of foreign flows increasing oil imports and lack of foreign investment are the major reasons for the sudden depreciation of Pakistani rupee.
Pakistan’s rupee is overvalued by at least 20% and has a negative impact on the country’s exports. The local currency last week dropped the most in nine years amid rumours of devaluation due to surging trade deficit and shrinking exports of the country. While it surged the next day, the uncertainty has taken a toll on the business community.
That day, the rupee hit its lowest level since 2013 by shedding value of more than 3% to 108.1 against the US dollar. The country’s economy is also under severe pressure due to surging trade deficit on the back of falling exports and a sharp increase in the import bill.
The trade deficit soared 42% to an all-time high of $30 billion in the first 11 months of the financial year 2016-17. In May, the trade deficit surged 61% to $3.465 billion, according to the latest data released by the Pakistan Bureau of Statistics.
The import bill during July-May 2017 period rose 20.6% to $48.54 billion. It is expected to reach over $53 billion this fiscal year. In the 11 months through May, the export dropped from $19.14 billion a year ago to $18.54 billion, putting pressure on the currency.
The APBF president said that devaluation has always pushed inflation higher and made the life of a common man miserable.
He observed that there were multiple reasons for currency depreciation, which in combination push and pull the respective currency’s quotation in conjunction with other currency.
“If there is more demand for dollars in Pakistan than the supply, rupee would depreciate. So, the government should take steps to commence trade between Pakistan and China in local currencies with special emphasis on greater Chinese investment in Pakistan’s lagging value-addition economic activities for making meaningful improvement in bilateral trade balance,” Qureshi added.
He feared that if notice of the situation was not taken immediately, rupee would go down within the next few days, as demand of dollars may be created by importers.