Our Special Correspondent
Lahore: Friends of Economic and Business Reforms (FEBR) President Kashif has urged the government to control volatility of rupee against the US dollar, as the industrial revival and economic growth is not possible without stability of local currency.
Kashif Anwar said that Pakistani rupee continued its downward slide against the US dollar, having no sign of recovery, despite the fact that Pakistan’s Current Account Deficit has turned into surplus owing to lower imports and better inflows.
The FEBR President said that, the Current Account Deficit fell to $2.97 billion during fiscal year 2019-20, leading to surplus account balance but now rupee continued to sink. He said that sharp depreciation of rupee shows that Pakistan is again moving towards a trade deficit regime. He said that the inflows of workers’ remittances also grew by 6.4 per cent to $23.12 billion during fiscal year 2019-20 which should have a positive impact on dollar-rupee exchange value.
He said that Pakistan has received around $500 million in soft loans from the World Bank last month, helping the rupee to maintain its uptrend, besides bridging the shortfall in budgeted expenditures.
He said that massive fall of rupee value would harm the economy, as the cost of deals done by the businessmen with their foreign buyers would increase manifold due to unprecedented plunge of local currency against dollar. Besides increasing exports and controlling imports the government will have to take administrative measures, as a large demand for cash dollars are seen in the market. He said that the rupee has dropped by 2.9 per cent or Rs4.5 against the dollar during the
last couple of months.
Kashif Anwar said that in dollar value, the gross domestic product (GDP) contracted 5.22 per cent in FY20. The GDP value in terms of dollar does not reflect the growth pattern, as Pakistan measures economic indicators in rupee value and converts it into dollar term.
So, the volatility in the rupee-dollar exchange value would lead to a huge difference between GDP growth in dollar value and real growth in rupee term.
The leader of the business community said the foreign direct investment rose 88 per cent to $2.56 billion in the country in FY20, as in June alone, the foreign investment surged 70.53 per cent to $174.8 million, which could help strengthen the rupee and the foreign exchange reserves.
He said that the current account deficit shrank to 1.1 per cent of gross domestic product (GDP) in FY20 and the deficit of $2.96 billion is the lowest in five years which should be appreciated but it is also the fact that the much-needed improvement in the current account deficit was initially achieved by compromising economic growth. Later, the Covid-19 outbreak slowed down the economy further and caused record negative growth for the first time in Pakistan.