KARACHI: Only the day after Prime Minister Imran Khan formed a committee, headed by Adviser to the PM on Finance Dr Hafeez Shaikh, to control devaluation of the local currency and capital flight from Pakistan, Pak rupee plunged to record low.
Subsequent to agreements with the International Monetary Fund (IMF), rupee shed Rs6.03 or 5.0 percent against US Dollar on Thursday. Dealers said the dollar was not easily available in the market, and exchange companies were not in a position to provide any large amount of dollars.[the_ad id=”31605″]Meanwhile, the country’s business community has criticized over 5.0 percent depreciation in the rupee value. Advisor to President Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Mazhar Ali Nasir said currency devaluation would not benefit the economy in any way. “Over 50 percent of the industrial inputs are imported while the buyers demand additional discounts as they find about the rupee depreciation. Local businesses cannot compete in the international market.”
Nasir said the Advisor to Prime Minister on Finance Hafeez Shaikh had categorically mentioned that currency value and interest rates was the domain of central bank and the government had no control over it.
“Currency is depreciating, interest rates are surging; while the government has no clear direction to deal with the issues,” Nasir said adding one should forget import substitution and export enhancement in such a scenario.
“We are very disappointed,” said Junaid Ismail Makda President Karachi Chamber of Commerce and Industry (KCCI) adding, “government is implementing IMF’s dictation without considering the ground realities and understanding the issues of business community.”
President KCCI said the cost of doing business was going northwards and there was no let up in surprises, which were quite contrary to the claims of PTI ministers.
“Businesses are in a state of depression as none of the sectors are progressing. Anymore increases in utility prices, fuel prices or interest rates would be disastrous for the industry.”
CEO of Arif Habib Commodities Ahsan Mehanti said the equity market took the currency devaluation quite seriously and panic selling was witnessed in the early hours. “Weaker rupee against US dollar adversely impacts the corporate earnings as this increases the cost of doing business. So we expect weaker earnings going forward.”
Mehanti said there was a lot uncertainty in the market regarding currency value, interest rates and utility rates. “Commitments made with IMF were not disclosed so there is much uncertainty in the market about everything.”
Senior Vice President FPCCI Mirza Ikhtiyar Baig said the policy of depreciating rupee had backfired as there had been less than one percent growth in exports despite around 40 percent devaluation in the currency while the higher interest rates had failed to contain inflation.
The IMF had spoken of a “market determined exchange rate” in its statement on the programme, and the financial markets have not responded favourably to the announcement.
“Fears of further devaluation as a result of the agreement with the IMF have depressed the currency market and the rupee may lose more against the greenback in the coming days,” an analyst said.