ISLAMABAD - Although Ministry of Finance denies its role in fixing the exchange rate independent economists believe that State Bank of Pakistan allows the currency devaluation after getting green signal from top officials of the government.

Background discussions with officials of the ministry and economists revealed that SBP was apparently autonomous in setting the exchange rate in the country but intervention of finance minister could not be overruled.

Prime Minister Imran Khan on Monday claimed that the SBP did not inform the government before devaluing the rupee last week. “I found out about the dollar hike through television,” Khan said in a meeting with media persons.

However, top independent economists did not agree to the claim of the premier. They said that SBP could not take a major decision of devaluing currency without consulting the government. “The State Bank is autonomous in fixing the exchange rate only in papers but practically it always takes permission from the finance minister,” said an independent economist wishing not to be named. He said that SBP would be autonomous when the secretary finance would not be included in board of the central bank. “Secretary Finance has more weight in the board of the SBP as compared to other members,” he said.

Dollar had surged to all time high of Rs144 on Friday, which later settled at Rs138. However, the rupee was trading 1 percent weaker on Monday, at about Rs137.5 per dollar. Market sources said that dollar would fluctuate at around Rs137 to Rs140 in next few days. The government had apparently accepted one of the conditions of International Monetary Fund to devalue its currency. The IMF had recently conditioned Pakistan to devalue its rupee to Rs145 against the US dollar. However, the government kept itself away from the rupee depreciation by saying SBP was responsible for fixing the exchange rate in the country.

Another economic expert said that it was one of the conditions of IMF to devalue the currency, which could not be done without the government’s approval. He said that devaluing the currency was one of the major economic decisions in any country, which had serious economic and political implications. “I do not believe that SBP is as autonomous as claimed by the Prime Minister. The SBP in consultation with ministry of finance had let the currency to depreciate in order to accept one of the conditions of the IMF”, he said.  

He further said that there were several examples in the past when former finance ministers intervene in the market to control the rupee depreciation. Former Finance Minister Ishaq Dar had not allowed the currency to devalue for four and half years despite strong directions from the IMF. Later, in November 2017, then Finance Minister Miftah Ismail had allowed the depreciation, he said.

However, incumbent Finance Minister Asad Umar had clarified that the issue of dollar was associated with supply and demand. He said that the federal government would no more artificially control the currency value. He informed the media that the rupee was artificially kept stable by purchasing dollars during the last PML-N government.