Daily Times

While expressing deep concern about the depreciation of the rupee against the dollar, KCCI president Muhammad Idrees warned that the depreciation of the rupee would have a significant impact on inflation by raising the cost of doing business and thus making Pakistani goods uncompetitive in export markets as well as making them more expensive.

He pointed out that the Pakistani rupee has lost almost 2 percent since the beginning of 2022, but in 2021, the local currency had lost approximately 11 percent in the inter-bank market, starting at Rs159.2 and reaching Rs176.51 by the year’s end. “On March 11, 2022, the SBP’s foreign currency reserves were valued at $15.83 billion, while the country’s total liquid foreign currency reserves were valued at $22.28 billion.

The country’s current account deficit of $11.6 billion in the first seven months of the current fiscal year, compared to $1.028 billion a year earlier, was “really worrisome,” he said, adding that “severe devaluation of rupee has raised the cost of doing business and fostered the inflation, so it is really crucial to review the current strategies being pursued by the economic managers.” he said.

As mentioned by Muhammad Idrees, the weakening rupee versus the dollar is being blamed on opposition pressure to remove Prime Minister Imran Khan via a vote of no confidence, as well as the turbulence over in Ukraine. According to him, “even though we can’t do anything about Ukraine’s situation, we need to make sure that the ongoing political situation doesn’t have a significant impact on Pakistan’s economy,” he said, adding that unfortunately, federal ministers aren’t paying attention to serious economic crises and are instead “completely engaged in politics.”

Economic problems, such as energy crises, currency devaluation against the dollar, and expanding trade deficit, might put Pakistan’s survival at risk, he said.

Any efforts taken in the past few years to keep GDP growth at or over 5% will be in vain if political uncertainty isn’t resolved quickly, he said.

Devaluation is hurting and has reached a point where it is unbearable for the government, according to him because exports account for only 10% of GDP and local trade and imports account for 90%.

His main point was that if the current situation isn’t dealt with swiftly and carefully, the excessive devaluation will continue to drive up the cost of doing business, which will have a negative impact on industrial output, raise unemployment, and unleash a wave of inflation that will hit the middle and lower classes hardest, further impoverishing those who are already suffering from the effects of rising prices. “Effective control is needed of the inflation monster.”

Muhammad Idrees stated that the Karachi Chamber, aware of all the upcoming economic challenges that Pakistan is likely to face, has approached federal ministers on a regular basis to discuss these issues, suggest policy changes, and come up with a practical action plan in the interest of Pakistan as a whole, but none of these ministers has hailed the Karachi Chamber’s efforts. Politicians, legislators, and economic managers should focus more on the economy than on the political arena, according to me.

Erroneously, he believed that, unless action is taken to avoid further rupee devaluation against the dollar, important economic indicators that had been rising will soon begin to fall. This was his wish for the federal government.