Falling imports will lower dollar demand next month: Miftah

ISLAMABAD: Federal Minister for Finance and Revenue Miftah Ismail Thursday said the pressure on the rupee would start receding from next month with persistent decrease in imports and claimed that stability had returned following the government’s Monday announcement that it intended to complete the remainder of its term. 

Earlier in the day, the rupee continued to take a trashing against the US dollar with the local currency falling to Rs227 in the interbank market

Addressing a press conference here along with Defence Minister Khawaja Muhammad Asif, Miftah Ismail said the domestic financial markets were jolted after the Punjab Assembly by-elections on July 17 but the situation along with the dollar market was now “under control”. 

“The dollar market has been quite shaken for two to three days since July 17 but it has now been brought under control slowly,” he said.

The minister claimed that although the pressure on the local currency against the greenback was mainly due to political turmoil as the people felt that the federal government might not stand, the negative sentiments subsided immediately when the latter made it clear that it would complete its tenure.

“The current month’s imports are less as compared to those in June and the same month of the previous year i.e. July 2021,” he said, adding that imports next month would also be lower due to measures taken by the State Bank of Pakistan (SBP), which would further reduce pressure on the rupee. 

“You will begin to see its effects by next week, but more importantly, from next month when the daily demand for dollars in banks will be less than supply,” he assured while adding that the economy was on the right track and all indicators, apart from the exchange rate, were positive.

Miftah further explained that the country’s import bill in June totalled $7.5 billion and was a historic high; of this, imports worth $3.7 billion were related to the energy sector and the rest included other goods. “The pressure on the rupee is now mounting due to payments of these imports,” he said.

He said the State Bank of Pakistan (SBP) took multiple measures due to which very few letters of credit (LCs) were opened. “In the current month, imports will fall and further reduce in next month.”

Miftah informed that the country had a storage of over two billion liters of diesel, which was enough for the next 60 days and would not need to be imported for at least one month,” he said, adding the government also had furnace oil stocks for the next two to three months. 

He pointed out that demand for motor gasoline had reduced after an increase in the prices of petroleum products because people were hoarding fuel in anticipation of a rise in its price when it was cheaper. 

The impact of all the above factors would be witnessed next month, with a significant decline in the demand for dollars in the banks, the minister remarked.  

Addressing rumours about the economy, Miftah said it was going in the right direction and dispelled the impression of a default. 

Replying to a question, the minister said the coalition government had no regret of taking tough economic decisions because it had risked the party’s political gains only to save the country from falling into default. 

“The voters would hopefully support the government’s actions in the next election,” he added.