KARACHI: The export-oriented value-added textile sector has flayed the sudden devaluation of Pak rupee stating such exorbitant devaluation will increase the import bill of the country and open floodgates of inflation for the masses.

Pak rupee devalued by around 6.0 percent in early hours of the interbank market on Friday to around Rs142/USD. The government has now devalued Pak rupee by around 22 percent during the current calendar year and 26 percent during the last 12 months. Further, since the new government has come into power, Pak rupee is down 10 percent.

Pakistan Hosiery Manufacturers & Exporters Association (PHMA) criticized the current over 6.5 percent devaluation of Pakistani rupee against US dollar extremely disastrous for the nation.

Chairman Pakistan Apparel forum Jawed Bilwani said that for the textile export sector, cotton was available on international price. “Most of the inputs are also imported such as dyes, parts, chemicals and petroleum products etc. As such, due to devaluation, their cost will also increase, resultantly increasing the cost of exportable goods”.

Bilwani said it would have negative impact on exports, increase import bill of the country and open up the flood gates of inflation, which might lead to anarchy and precarious law & order situation.

Pakistan foreign exchange reserves (reserves with SBP) also declined from $9.8 billion in July 2018 to $8.0 billion as of Nov 23, 2018, which is less than 2-month of import cover. This is despite the $1.0 billion inflow from Saudi Arabia, which the country received last week.

Exporters and industrialists are of the view, this devaluation would make commodities costlier and manufacturing sector would face a very difficult time. Under the current situation, industry will have only two options, either to close down or increase prices further and become more uncompetitive in the international market.

Devaluation of currency can only help one time for the non-realization of export proceeds or consignments in pipeline, otherwise, foreign buyers demand extra discounts to share the benefit of devalued Pakistani currency.

“If we calculate the impact of 5.0 percent rupee depreciation value on the imported raw material prices, which will go up by approximately 70 percent due to rupee-dollar parity, the difference will come 3.5 percent out of which the buyers will take away the advantage of 2.5 percent and exporter will bear loss,” Bilwani added.

Jawed Bilwani demanded the government to immediately call all the stakeholders and devise a joint strategy to control the current situation in the currency market.

Meanwhile, Finance Minister Asad Umar said the central bank would not attempt to control the dollar price through artificial means.

“The State Bank of Pakistan is monitoring and determining the exchange rates. In the past, the rupee was maintained artificially. [But not anymore], the State Bank is free to make its own decisions [on the matter],” said the finance minister.

He lamented that the artificial control of the exchange rates destroyed production in Pakistan. “The country cannot export wheat anymore because of this artificial control. Our textile and shoe-making industries were destroyed due to this.”

Umar said that the previous government took out loans to maintain the exchange rates. “And this harmed our industries,” he noted.

It should also be noted that Pakistan government held talks with the International Monetary Fund (IMF) for a bailout during November 2018, where the fund had indicated need for further devaluation in the Pak rupee as well as hike in interest rates, as per reports.