MPs take notice as rupee plunge continues
ISLAMABAD/LAHORE – A parliamentary committee on Wednesday took notice of sharp rupee depreciation against US dollar in last few days and summoned top officials of Ministry of Finance and State Bank of Pakistan next week to explain the reason of Pakistani currency’s fall.
The rupee has weakened to a record low in recent days. On Wednesday, Pakistani rupee continued to depreciate in the open market, losing another 50 paisas to trade at Rs111.50 against dollar. However, the local currency recovered a little in inter-bank market, gaining 23 paisas to settle at Rs110.40 versus the greenback. The ministry of finance, which is under the control of Prime Minister Shahid Khaqan Abbasi, has kept silence on the sharp rupee depreciation since last Friday.
However, the Senate standing committee on finance has taken the notice of rupee depreciation. “We have summoned the Governor and Deputy Governor of State Bank of Pakistan and officials of Ministry of Finance on December 19 to know the actual reasons behind rupee depreciation,” said committee chairman Senator Saleem Mandviwalla. “Dollar value had suddenly increased in July this year, which was investigated by then finance minister Ishaq Dar. However, the government has not shared the report with parliament or media,” he said and added that government was intervening to keep the rupee stable over the past few years, which led to its overvaluation. However, after Finance Minister Ishaq Dar left for London for medical treatment, the government decided to stop intervening and let the rupee take its course, which has resulted in the current devaluation, he remarked.
Tariq Bajwa, Governor State Bank of Pakistan, the other day said that exchange rate is now closer to the equilibrium. He termed the current account deficit as a serious challenge by saying change in exchange rate is due to this challenge (current account deficit).
According to a news report, the IMF had proposed the government to devalue its currency by at least 16 percent to Rs120 a dollar. However, the government agreed for six percent.
It is worth mentioning here that dollar had surged to Rs108.25 on July 5 from Rs104.9 of a day before and the then 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 government had not shared the investigation report yet.
Meanwhile, players in both inter-bank and open markets struggled to assess the extent of the ongoing rupee slide as the currency depreciated on the fourth consecutive day. The consumers complained about the unavailability of dollars during the day, as exporters have started withholding the proceeds of their exports, which is causing a shortage of dollars.
LCCI standing committee on economic reforms chairman Kashif Anwar flayed the SBP for not removing the price cap and warned that speculators were active in the market, which could make the situation out of control, resulting in alarming price hike. He said the country was dependent on imports and the prices of imported items would increase by at least 15 percent, as importers were going to face increased shipping and port charges. He said that major victims of the devaluation have been importers whose business is suffering because of fluctuations in the exchange rate.
LCCI former vice president said that there should be a limit to the erosion in the exchange rate so that masses can be saved from looming flood of inflation. He said that retreat of the rupee is damaging the economy and the masses while it will force millions more to live below the poverty line.
Kashif Anwar said that those who accepted the demands of IMF to devalue local currency should have also considered the national interests as the fragile economy facing twin deficits cannot withstand such massive shocks. He said that State Bank should not delay an announcement of the exchange rate otherwise imports of many necessary items would be deferred resulting in another crisis.
Forex Association Pakistan President Malik Bostan claimed that the dollar was available in the open market. He said the dollar’s price would increase alarmingly if the SBP did not intervene, asking central bank to announce maintaining dollar price at Rs110 otherwise the speculators would take advantage of the situation.