Rupee fall won’t impact exports
ISLAMABAD – The government has depreciated the rupee value only due to the pressure of International Monetary Fund and dollar’s appreciation would not help in controlling soaring current account deficit and would only enhance Pakistan’s loan.
“The rupee depreciation will have no positive impact on the exports and current account deficit. The government should control the current account deficit through a package to enhance exports and control imports as well as rupee depreciation,” said an independent economist Dr Ashfaque Hassan Khan while talking to The Nation.
Pakistani rupee depreciated by 4.8 percent last week. Dollar value has gone beyond Rs110.5 per rupee, closer to the equilibrium. However, the IMF has welcomed the move of State Bank of Pakistan (SBP) to allow adjustment of exchange rate in recent days. However, the Fund made it clear that they have nothing to do with this and this is an independent policy decision.
Khan made an assessment that Pakistan would be requiring $16 billion in the current fiscal year. “The government will either issue further bonds in international market or borrow from commercial banks to finance the financing gap,” he added. He informed that new government after 2018 general election would definitely approach IMF for balance of payments situation after incumbent government refused to take new loan programme. According to Dr Ashfaque’s estimates, the current account deficit could peak to $18 billion and debt servicing requirement would be standing at $8-$8.5 billion so total financing requirement could touch to $26 billion. However, the traditional foreign inflows would be hovering around $12 billion so remaining $16 billion would remain big challenge for the country’s economy.
The rupee may continue to remain under pressure for some time because of soaring trade and current-account deficits. Pakistan’s trade deficit swelled to $15 billion with exports of $9 billion and imports of $24.1 billion during first five months of the current financial year as against $19.9 billion of the same period last year. The current account deficit, which surged by 122 percent to $5.013 billion in the first four months (July-October) of the current fiscal year as compared to $2.259 billion of a year ago.
On the other hand, the weakening currency has increased the cost of debt servicing. Pakistan’s external debt and liabilities have mounted to $85 billion, the State Bank of Pakistan’s latest report suggested. The aforesaid loan has not included the recently launched $2.5 billion.
IMRAN ALI KUNDI