KARACHI:Pakistan Businesses Forum (PBF) on Friday expressed concerns on weakening of rupee despite improved exports and remittances.
PBF suggested the government to control volatility of rupee against the US dollar and come up with policy reforms to control depreciation of rupee.
Devaluation of rupee was not good for the economy as the budget was planned while keeping in mind the value of a dollar at Rs 152 which has now climbed to Rs 162, vice president PBF, Ahmed Jawad said adding that, “The rise of the dollar will hit key budgetary projections, increase interest payments and make almost everything costly”.
Ahmad Jawad talking to reporter stated that Pakistani currency has lost 50% of its value since December 2017 till date while floating exchange rates and depreciation of the currency may further drive the inflation rate higher and negatively affect the country’s current account because of more expensive imports.
Jawad was of the view that market based floating exchange rate lead to unnecessary movement of capital inflows and outflows which can severally damage an economy that has sound fundamentals, so many emerging economies have tried a hybrid approach to get the appropriate result.
The country which recovered from the South East Asia crisis the fastest was Malaysia that imposed capital controls despite opposition from international financial institutions and global market players, he said and presented Chinese Yuan as another example where Yuan has been allowed to fluctuate within a narrow band with outstanding success for the country’s industrialization and rapid economic growth.
Even Former PM Malaysia Mahathir believed that the fixed currency lent stability to the country, he added.
“The reasons to peg a currency are linked to stability. Especially in today’s developing nations, a country may decide to peg its currency to create a stable atmosphere for foreign investment”, Jawad said.
A floating exchange rate is determined by the private market through supply and demand and a fixed or pegged rate is a rate the government (state bank) sets and maintains as the official exchange rate.
He said that it’s now an open secret globally that IMF Program reduces economic growth and deepen and prolong financial crises, creating severe hardships for the poorest people in borrowing countries, because IMF policy prescriptions provide uniform remedies not adequately tailored to each country.
The industrial revival and economic growth was not possible without stability of local currency, the PBF official said suggesting that PKR 140 equal to one dollar was much sufficient with the ongoing economic numbers.