KARACHI: Karachi Chamber of Commerce and Industry (KCCI) President Muffasar Atta Malik, while expressing deep concerns over the continuous devaluation of rupee against the dollar said that the dollar has risen sharply to an all-time high of Rs122 which has to be controlled – otherwise, it will have a devastating impact on the already beleaguered economy.
In a statement issued, the KCCI president said that the government recently devalued the Pakistani rupee for the third time in six months and the rupee has continued to fall against the dollar, stoking concerns that the country may have to go to the International Monetary Fund (IMF) for a bailout.
“We fear that the rupee may fall further in the coming months keeping in view Pakistan’s dwindling foreign exchange reserves”, he said, adding that such abrupt devaluations in the past have brought about economic distress, which lasted for several years. Hence, there is no justification in repeating those actions again that have failed miserably in the past. Currency devaluation for a country like Pakistan will have negative economic implications in the long run, he opined.
Muffasar Malik further elaborated that although exporters will be happy to see the rising value of the dollar and the country’s economic indicators will also display some improvement in exports, but this increase can only be attributed to the dollar value as the export volume remains the same – in fact, our exports have descended sharply to many destinations around the world because of rising costs of doing business. “It must be kept in mind that the rising dollar would lead to costlier imports and the exporters will also bear the brunt due to rise in cost of imported raw materials, plunging the economy into further deep crisis”, he cautioned.
He said that despite the many measures taken to discourage the imports including the imposition of Regulatory Duty (RD) on many items, Pakistan’s imports remain inelastic and a weaker rupee will not help. Mostly, they consist of raw materials (petroleum, chemicals and metals), intermediate goods, or machinery. Any devaluation would increase their cost thus making Pakistani exporters less competitive.
Muffasar Malik said that it has taken almost 10 years to rebuild investor confidence to an extent as foreign investors are gradually making a comeback. If the currency is devalued, it would send a negative signal to potential investors.
The KCCI president further warned that the depreciation will terribly affect the lives of the masses as it will increase prices of all essential items and result in high inflation.
He was of the opinion that petroleum products have a major share in the import bill of the country. As oil prices in the international market are increasing, the import cost will also escalate, he feared, adding that strategies have to be defined on a war footing to ensure the economy stays afloat.
“It is a well-known fact that if petroleum prices, which are already too high, rise further, it would lead to hike in prices of all the products, including fuel-based thermal power generation plants” Malik added.
“When elections are around the corner and there is so much instability, the country cannot afford to make life more difficult for the poor and the middle class”, he said.
He advised the federal government to take measures to stop the further devaluation of rupee against the dollar before it’s too late and a situation emerges when we have no other option but to seek support from the IMF. Steps have to be taken to create an enabling business environment which is the only way forward to pull the economy out of a crisis, he added.