ISLAMABAD - The State Bank of Pakistan (SBP) has yet to complete the investigation of sharp increase in dollar value against rupee that gained Rs3.12 in a single day on July 5.

The US dollar has surged to Rs108.25 on July 5 from Rs104.9 of a day before. Finance Minister Ishaq Dar on a next day had ordered an inquiry into the matter. The government had decided to immediately appoint the new governor and sent Tariq Bajwa to take control of the SBP. The minister directed the SBP governor to investigate the matter in ten days to determine the reasons behind the rupee depreciation.

However, the SBP has not completed the investigation yet. “The investigation is still underway, which will be completed in next few days,” said SBP spokesperson Abid Qamar while talking to The Nation.  He further said that the central bank would present the investigation report to the minister once it completes.

The dollar value has come down to around Rs105 due to the notice taken by the federal government. SBP Deputy Governor Riaz Riazuddin, who was acting SBP governor on July 5, defended the increase in dollar value against Pakistani rupee. He informed the Senate Standing Committee on Finance few days back that decision was to correct imbalances in the external sector.

He was of the view that growing external deficits was one of the reasons for rupee depreciation.

All the economists and International Monetary Fund (IMF) were asking for rupee depreciation to boost exports. The IMF in its report stated that the real exchange rate is moderately overvalued between 10 and 20 percent. Greater exchange rate flexibility, fiscal adjustment and structural reforms would help narrow the gap. The fund argued that allowing for greater downward exchange rate flexibility would be preferable to administrative measures and more effective as means to strengthen Pakistan's external position.

The economists also supported that Pakistan’s currency is overvalues. Former adviser to ministry of finance Dr Ashfaque Hassan Khan few weeks back had said that that it was the right decision of the SBP for depreciating rupee.

He said that government was putting additional pressure on the exporters. He further said that government should not intervene in the market situation. However, Dar is an advocate of a strong rupee and believes that currency depreciation cannot give any competitive advantage to the exporters.