LAHORE - As the business activities have been facing slowdown amidst uncertainty on political front, the rupee depreciation against dollar also continued while commercial importers and exporters have slowed down process of transactions.
According to financial market experts, the economic fundamentals are not so bad to let the rupee value drop easily. Only speculations are damaging the worth of local currency as $370 million has been received on Thursday from America against Coalition Support Fund while remittances in the preceding month have shown a jump of more than 15 percent. Hence, apparently the rupee should remain stable against greenback in this economic scenario. Lahore money market dealer and the CEO of Lucky Money Exchange Fazil Hussain said that rupee has eroded over 3.5pc while property market is dull amid uncertainty on the political crisis. Local currency 10-year bond yield has inched up 13bps to reach 13.31pc while Pak Eurobond yield has risen to 6.7pc from 6.5pc, while 2016 Eurobond yield has reached 5.3pc from 4.8pc.
Quoting the monthly figures, he informed that the remittances inflows are on the rise to record a substantial growth in July 2014, which has crossed $1.88 billion owing to increased values of expatriates’ money sending homeland to their families.
Money market experts stated that the year-on-year pattern showed 16.6 percent growth while the month-on-month sequence reflected growth of 14.4 percent.
If the compounded growth is estimated than the growth in remittances values settled at $414 million in July 2014, which is also first month of the financial year 2014-15.
According to them, SBP’s reserves have been falling since the first week of this month, but are still over $8.9 billion, reasonably high in the light of recent past experience. Hence, the real issue is political instability that should be restored to stabilise the rupee as well as the economy.
All Pakistan Textile Mills Association Punjab former chairman Shehzad Ali Khan suspected further delays in the implementation of economic reforms, as the government’s focus will remain on tackling the opposition’s challenge for quite some time, even if it successfully rides out of the current political storm.
He said that the country was facing a huge economic loss only because of wrong statements and irrational attitude of political players.
Shehzad Ali Khan said that a week of stalled economic activity costs the country $500 million or $2 billion per month and a weak economy like Pakistan cannot afford even $1 million loss of exports.
LCCI vice president Kashif Anwar said that the economy has been losing billions because of volatility in the capital markets and pressure on the exchange rate owing to the political turmoil.
He said that due to political unrest trade and economic activities are sinking therefore the business community appeals the protestors to stay away from such politics.
He said that such activities have not only tarnished the image of the country in the eyes of international community but are also hindering economic growth.
He said that the political leaders should settle issues in Parliament, which is a democratic, and the just forum for this purpose instead of disturbing the business activities and public life through holding sit-ins and rallies.
Muhammad Usman Ghani, a noted commercial importer and FPCCI former EC member, said that the rupee continued to depreciate sharply against the US dollar to cross Rs103, prompting the State Bank to call banks meeting to stop further devaluation, as the pressure is mounting on the demand for dollars. He said that exchange rate is in the grip of political uncertainty. He said that the government earlier succeeded in bringing back the greenback from Rs110 to Rs98 within months. However, the ongoing political crisis has unnerved the commercial importers.
The situation suited speculators who entered the market to manipulate it to their interest. He said that the State Bank should use influence through different banks.
He said that for the last few months there were no sign of state interference, as the dollar rate was stable while reserves were going higher.
Jawwad Ch, senior vice chairman of Pakistan Readymade Garment Manufacturers and Exporters Association, observed that there were a lot of payments in the system but the political uncertainty made matters worse. He said that some positive news on the political front is desperately needed to arrest this free fall of rupee.
Replying to a question regarding total losses of business, he said that it was hard to calculate the substantial economic losses caused by the protests, which saw the government lock down the entire country last month to prevent the protesters.
Jawwad Ch demanded of all the political parties to show maturity and try to resolve issues through talks as politics of agitation is pushing national economy to the wall.