SBP asked to do more to stem free fall of rupee

SBP asked to do more to stem free fall of rupee

Sept 20

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Friday said the efforts of State Bank of Pakistan have stabilised the eroding currency to some extent but more should be done to stop its free fall.

Many among the business community think that monetary sovereignty has been surrendered to the IMF which has resulted in defeat of rupee at the hands of dollar on all fronts, said Muhammad Ali, Vice President FPCCI.

Speaking to the business community, he said that inter-bank as well as open market continues to see fall of the rupee which has lost around 7 per cent value since the current pro-business government has taken.  

Rupee may soon join club of other currencies which have seen double digit depreciation against the dollar, he said.

He said that inaction on the part of the government has resulted in a panic-like situation among masses putting additional pressure on the local currency.

Muhammad Ali said that the local currency has lost ability to resist the onslaught of dollar because the government has adopted a cool attitude towards the problem.

Government was deliberately devaluing the local currency without an announcement which indicates that there is something worth hiding from the general public.

India, Brazil and other countries have taken serious measures to save their currency while our economic managers have decided that local currency must shed points on daily basis, he observed.

The agreement with the IMF or paying back loan has failed to strengthen the rupee or the economy and it seems that the depreciation would not stop as long as IMF desires, said Muhammad Ali.  

Import of petroleum products alone are enough to create imbalances on external account, reduce the country’s import capability and hit the exchange rate for further devaluation of local rupee.

Devaluation will make imports costly reducing their demand while exports cheaper depriving manufacturers of incentive to cut costs and become more efficient which will increase production cost over time.

Why the government and the SBP have failed to foil the plans of speculative forces, he questioned.