Daily Times

KARACHI: Rupee is still under constant pressure against the greenback in open market on back of debt servicing and decline in remittances, currency experts opined.

It seems the official open market rate against dollar would remain between Rs 108.40 and Rs 109 in the coming months.

Foreign exchange reserves were around $21,073 million in December 2015 and in December, it stood at $23,132 million. “If these figures are taken in light of falling rupee against dollar, there is no much improvement in foreign reserves of the country”, said Fazal Ahmad, a currency expert in Houston. Gradually downward rally of rupee against dollar is greatly contributed to Pakistan’s meeting all conditions by international donors.

Foreign Direct Investment (FDI) also witnessed a decline by $460 million in almost six months of fiscal year 2016-17.

Pakistan fulfilled the condition of increasing power tariffs to reduce the subsidies and has already withdrawn subsidies for industrial sector by increasing tariffs up to 96 percent with significantly reducing subsidies for commercial consumers.

The government has already increased power tariff for industrial, commercial and domestic consumers, however, there has been a raise in domestic consumer tariff by 15 percent.

The International Monetary Fund (IMF) has been steadfast on its stance and succeeded in pressing Pakistan to meet its conditions for levying tax on agriculture sector, enhance energy price and ensure implementation of general sales tax. The IMF also put a proposal before the Pakistan that surplus cash crops would be kept under the IMF supervision.

The IMF wants Pakistan to raise tax revenue from the present 10 percent of gross domestic product (GDP) to 15 percent by 2017, which is peril for our economy, said Fazal Ahmad.

The payment in dollar for edible oil imports usually increases in September to December on back of increase in edible oil and banaspati ghee domestic consumption in winter, he added.

The country’s foreign exchange reserves for payment of export bills and bills on oil, commodities and major raw industrial materials’ imports are also under immense pressure as demand for dollar has increased.

Fazal Ahmad said the average greenback value against the rupee was close to Rs 98 in December 2012 in contrast to Rs 59.09 in December 2001. “Today it marks a 65.5 percent-plus depreciation of the rupee against the dollar.”

On the IMF front, Pakistan repaid $4.4 billion in the three years ($3.3 billion in FY14, $1.3 billion, $1.3 billion in FY15 and $0.60 billion in FY16).

Industrial sector’s view: In order to manage fiscal imbalance, the government has to give incentives to export-oriented sectors instead of moving to IMF for more loans on humiliating repayment conditions.

For this purpose, the government has to focus on investing in energy solutions, enforcement of law and order, lowering tariffs on smuggling-prone items and increasing the share of direct taxes in revenue to achieve key economic targets, observed prime textile and leather sectors experts.

The rising risk perception about investing in Pakistan is hitting hard the FDI that fell sharply in recent months and needs to be tackled through a comprehensive policy approach by involving real stakeholders.

There is a need to work together for the betterment of the country, said former Pakistan Tanners Association chairman Agha Saiddain while stressing the need for the government to make the resolution of energy crisis as its top priority in order to increase exports and avert balance of payment crisis.

The dwindling value of rupee has already caused an increase of about Rs 285 billion in country’s debt without borrowing a penny, and if government could not bring stability in currency rate, business and economy would plunge into further problems.

The government has to remove the bottlenecks discouraging foreign and domestic investment, including energy shortages and war on terror after effects, besides reducing cost of doing business and announcing consistent policies.

The country’s reliance on costly thermal power is jacking up the cost of production and import bill.