ISLAMABAD - State Bank of Pakistan (SBP) Governor Tariq Bajwa on Thursday said that the central bank was compelled to depreciate the local currency as foreign exchange reserves were depleting due to widening current account deficit and non-inflow of foreign investment in the country.

He warned that inflation would increase in the months to come due to the depreciation in currency. He informed the Senate Standing Committee on Finance that he had consulted the Finance Minister Asad Umar before depreciating the currency. “It is not in my knowledge that what Finance Minister had discussed with the Prime Minister before depreciating the currency,” Bajwa informed.

Giving details of the rupee depreciation, he informed the parliamentary committee that Pakistani rupee was depreciated six times in last one year. The US dollar had gone to Rs139 in December 2018 as against Rs105 in November last year. The SBP had allowed the depreciation due to continuous decline in foreign exchange reserves, which are currently enough to cover less than two months imports bill. The major reason behind the depleting reserves was the widening current account deficit that had gone to $19 billion during last fiscal year. Similarly, the pace of foreign investment inflow in the country is much slower while import bill is increasing due to massive spending on importing oil, he added.

The Senate Standing Committee on Finance, Revenue and Economic Affairs was held on Thursday. The meeting commenced with consideration of a point of public importance raised by Senator Muhammad Talha Mehmood regarding the depreciation of the rupee against the dollar.

Minister of State for Revenue Hammad Azhar informed that previous government had artificially controlled the currency, which should be depreciated to control the imports of the country. He further informed that rupee depreciation is helping in enhancing the exports and remittances and reducing the imports. Meanwhile, the government has to repay $9 billion as previous loans. He said that rupee depreciation would not increase the public debt. However, his statement was criticized by the committee members who said rupee depreciation always increased the debt.

 Senator Mian Muhammad Ateeq said that he agreed with the issue of appreciation and depreciation, but would like to know what ‘administrative’ measures are being implemented by the government despite which even today cash dollars are being flown out of three major airports in Pakistan.

Senator Sherry Rehman was of the view that the gap between the dollar rate and the Pakistani rupee is increasing as a result of which Pakistan is hurting on its imports. The profits that were expected from imports are not coming in due to which there is an increase in deficit. Senator Talha Mehmood showed displeasure on rising prices and said that he is doubtful, whether the economy could be revived.  He said that in Pakistan in addition to export, all industry raw materials is import based. The depreciation has caused a huge gap which is critical.

The Committee showed dissension and displeasure on the briefing given by Ministry concerned.

Regarding issues of hacking of bank accounts, it was revealed that no individual account holder suffered. Bank accounts of a private bank were hacked on which $6 million was withdrawn. The Committee was also informed that in order to protect account holders from such cases a ceiling on transactions has been enforced. 

While deliberating over the Public Petition submitted by Mr. Muhammad Usman Rafiq, regarding provision of M. Phil allowance in accordance with HEC criteria, the Committee was of the view that this was a policy matter that has to taken up by the Ministry of Finance.

Discussing issues being faced by the Rice Industry, the Committee recommended that FBR, while imposing taxes must realise that the middleman is not hurt but the grower.  While reviewing the work and performance of the Central Directorate of National Savings, the Committee was happy to see that in future it planned to introduce Shariah compliant products.