ISLAMABAD, October 26, (INP-WealthPK): The decline in the value of rupee against the dollar has again made the markets nervous. The recent volatility in the value of rupee has elicited responses from traders and industrialists asking the government to take bold steps to rectify the situation.
The Pakistan Industrial and Traders Associations Front (PIAF) has said that the rupee is again losing its value in the inter-bank market. It remained stable for two weeks but then it started to fall again against the dollar. The rupee lost its value for seven consecutive bouts and posted a cumulative decline of PKR3.16 against the dollar during the whole week. Currently, the rupee is being traded in the range of PKR225-227 against the dollar in the open market. PIAF has said that this kind of volatility in the value of the rupee hurts the traders since they cannot have a consistent value prediction for the goods they sell.
Chairman of the PIAF Faheem Ur Rehman Saigol has said that causes of the depreciation in the value of rupee should be addressed by the government at the earliest. They include dwindling reserves, uncertainty in the markets because of a lack of confidence in commitments of the government and isolation by the international creditors. He said that the promises of the Minister for Finance Ishaq Dar have failed to bear results. “We do not need promises, we need actual results,” he said.
He said that despite a fall in the current account deficit (CAD) for three consecutive months, exchange rate is still not appreciating. The CAD of the country has seen a decline because of a ban on imports. Decrease in the volume of imports has saved a lot of precious foreign exchange to the country. This has resulted in the shrinking of CAD. The total decrease in the balance of CAD has been USD3.5 billion from the month of August when it was almost double the current value. On a year-on-year basis the CAD for the Q-1 of FY-23 is recorded at USD2.2 billion when it was USD3.5 billion in Q-1 of FY-22.
The PIAF Chairman observed that “the State Bank should have a clear policy to curb the volatility in exchange rate. It should be fully prepared to act and monitor the movements more vigilantly and should be ahead of the curve as they have more information than an average market player. And being back in the IMF program amid the falling global commodity prices and full coverage of external financing needs, there is no basis for continuation of the high volatility in exchange rate.”
He criticised the performance of the State Bank and said that “despite having a stated policy to intervene to manage the exchange rate, the SBP was unable to control the situation. Speculators are making a lot of money by banking on the volatility of the exchange rate. The SBP pursues the policy on a daily basis. However, the volatility on weekly and monthly basis is more detrimental to the traders.”
“Efforts are needed across the board to manage the exchange rate. Increasing exports and decreasing imports is not enough. Administrative reforms are also needed to break the grip of speculators and hoarders on the forex market. No fiscal or monetary policy seems effective. All efforts of the government and the State Bank are coming to naught,” he lamented.
It must be noted that globally, the greenback stayed close to a 32-year high against the yen while edging up from a two-week trough against a basket of major peers as traders weighed improved risk sentiment against the prospect of aggressive Federal Reserve rate hikes. The dollar index – which measures the currency against six peers including the yen, sterling and euro – edged up to 112.01, after dropping to the lowest since October 6, of 111.76 overnight. Oil prices, a key determinant of currency parity, rose slightly amid plenty of caution as bullish signals like falling US crude stocks and a generally undersupplied market were countered by bearish factors such as uncertain Chinese demand growth and falling gas prices.
