LAHORE: The Businessmen Panel (BMP) of the Federation of Chambers of Commerce and Industry of Pakistan has called on the central bank to maintain its regulatory and stringent oversight of banks’ foreign exchange and money market operations to control volatility of the rupee – dollar exchange rate.
BMP Chairman Mian Anjum Nisar said it is a positive indication that the rupiah has started to appreciate against the greenback mainly due to lower imports and partly due to tight monitoring of foreign exchange operations by the SBP, suspending the operations of several branches of certain foreign exchange companies. for violating SBP regulations.
Mian Anjum expects that with a controlled import bill and lower trade deficit, the rupiah will gradually strengthen. He said the rupee’s depreciation has been exaggerated and driven purely by sentiment. The rupiah rose on concerns over domestic politics and the IMF program. The local currency had fallen by Rs52 or 23% in 2022 and by Rs19 or 8% in the past two weeks on fears of a delay in the IMF program, a drop in foreign exchange reserves and political noise increased. However, now he has started the recovery and should win again in the next few days, he hoped.
The former chairman of the FPCCI said that the measures taken by the SBP, along with other good news, helped to improve the exchange rate in the interbank and open currency market, with the Pakistani rupee registering the gain the most. higher in absolute terms against the US dollar.
He said weaker-than-expected imports for July and the IMF resident representative’s statement that Pakistan had met all the preconditions helped the rupee gain 12 rupees or 5% to 226 rupees. Given the recent volatility of the exchange rate and the difference between the interbank rate and the rate offered by exchange companies (EC) and banks to their customers, the State Bank has tightened control of foreign exchange transactions ECs and banks, leading to a strengthening of the local currency, which is a positive step and should continue.
He said the previous sharp drop in the rupee was seen after the government announced a high five-month current account deficit of $2.3 billion for the month of June. This took the full-year CAD to a second all-time high of $17.40 billion in the fiscal year that ended June 30, 2022. The massive CAD increase was funded by reserves exchange rate of the country.
As a result, reserves have shrunk to a mere six to seven week import cover at $9.3 billion. The rupiah continued to decline alongside declining reserves, he said. On the other hand, the resumption of foreign financing was at least four weeks away, as the IMF’s executive board was expected to meet and give final approval for the resumption of its lending program to Pakistan at the end of August 2022.
Until then, Pakistan must manage import payments and debt repayments with the limited foreign exchange reserves available.
Mian Anjum Nisar said that this situation could create unstable economic conditions, generating higher risks, and turn into low investment as inflation is one of the main sources of uncertainty. The high inflation rate leaves the nation uncertain about potential investments, he added.
The BMP chairman stressed the need to take the economic crisis seriously, asking the authorities to form an economic team council, comprising the country’s financial and economic experts taking businessmen on board to tackle the day the problem of the business community in a context of galloping inflation and huge depreciation of the rupee against the dollar.
Copyright Business Recorder, 2022