Exports go up as rupee falls against major currencies

KARACHI: The rupee depreciated against all major currencies in the first quarter of 2017, leaving a positive impact on exports.

According to the monthly Statistical Bulletin of the State Bank of Pakistan (SBP) issued on Thursday, the local currency fell against all major as well as regional currencies, except the Iranian rial. Pakistani exports to Iran declined during the first quarter of 2017.

The country has been struggling to grow its exports. With ever-increasing imports, the trade deficit in the first nine months of the current fiscal year reached $23 billion. A depreciation of the local currency and an increase in exports are positive signs for the country’s export sector.

China and the United States are Pakistan’s two major trading partners. The rupee depreciated against their respective currencies, which resulted in an increase in the exports from Pakistan.

The rupee fell 0.04 per cent against the dollar in Jan-March while exports rose 3.4pc year-on-year to $916.9 million during the three months.

In the case of China, the currency declined 0.89pc and the exports went up 15.6pc to Rs$489.3m.

The rupee depreciated against the pound by 1.25pc and the exports rose to $410m in the same period.

Exporters have been demanding that the local currency should be depreciated to boost exports. But policymakers were not convinced of the exporters’ argument in favour of depreciation. In the past, the government depreciated the local currency to support exporters, but the move did not yield desired results.

Economists believe that the rupee needs to depreciate 5-8pc as the currency is overvalued. However, the government has strictly managed the exchange rate regime. The change in the rupee’s value against the dollar has not been significant in the last one year. The rupee depreciated significantly in the open market during this period. But the SBP used its influence to keep the rupee-dollar parity almost unchanged in the interbank market.

In Jan-March, the rupee recorded the highest depreciation against the South Korean currency. The rupee depreciated 7.68pc against the won over the period under review while exports to the country rose 26.7pc to $86.3m.

In South Asia, the rupee is the weakest currency, except the Afghan currency. The rupee depreciated 4.62pc against its Indian counterpart in the first quarter of this year. Exports to India increased 2.6pc to $88.5m.

The rupee appreciated 0.65pc against the Iranian rial while exports to Iran fell 20pc to $6.4m.

The rupee depreciated against the Australian dollar by 5.33pc, Canadian dollar 0.91pc, Taiwan dollar 5.3pc, euro 1.44pc and yen 4.11pc. Pakistan’s exports to each of these countries increased over the three-month period.

Published in Dawn, May 5th, 2017

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Comments (10) Closed

Arshad Javed Sandal

May 05, 2017 09:55am

Depreciation of Pak Rupee for increase in exports is for one time only, it is not the substitute of economy growth. -Best is to repulse GST at the time of exports. -Ratio of GST refund can be calculated on the items which were imported. OR -Declared exports should be benefitted with regular Compensation @ 7.5% (This will help to stable Pak Rupee otherwise inflation in local market will boost). -Online Business should be declared as Exports. -Payment received through different agencies, likewise, WU, T/T, PayPal, Payoneer, Credit Cards, Banks, for online trade should be declared as foreign remittances.

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Alba

May 05, 2017 11:00am

China and the United States are everyone's major trading partners.

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azadi dil KI

May 05, 2017 11:02am

Wrong calculation. Indian rupee appreciated against $,£,¥,€ and all other major currency, but over export to those countries are grown.

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sabeeh ahmad

May 05, 2017 12:51pm

Best way to increase exports is that exporters get increase rate of ruppee. If market is @ 105, exporters get its proceeds realized at 106 etc. And to regulate imports , importers need to pay 107 to import. This will help to stabilize trade deficit, but in longer run , industrialization is the only option.

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vikas

May 05, 2017 01:51pm

One of the major reason for Pakistan's falling exports has been the artificially hiked value of PKR. This out prices Pakistan against competitors. Pakistan's problem is it's heavily dependent on imports for even basic commodities. Depreciating the PKR would raise import costs so high that the resultant inflation would be huge. Secondly the debt servicing cost of foreign debt would also become very high for the nation to afford. Thus depreciating PKR is also with risks. It's a funny catch 22 solution. The real way to get out of this is increased productivity and focused subsidies on chosen export industries and curbing imports to live within the means the nation can afford. It calls for sacrifices.

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Shazad

May 05, 2017 05:39pm

It is flawed logic that depreciation increases export. Fact is that, good management of country produces development and growth. Growth results in increase production of goods and services. It is this increase production of goods and services that reduces poverty, increases exports and also makes currency strong. It is obvious, as production of goods and services excess to country's requirement gets exported and restrict imports. If currency is devalued than it hurts economy because it increases inflation, foreign debt, and cause brain drain. Costs to business increases, pushing them to wall. This in turn reduces production of goods and services, resulting in declining exports and increasing imports. Pakistan: 2001-2008 was most stable period for rupee ($ ~ Rs 60). During this period export increased from $8 bn to $21 bn (best ever export growth for Pakistan). If one looks around, will find that countries whose currency are stable or appreciating, their exports are increasing too.

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imran ali

May 05, 2017 05:50pm

Pakistan needs to produce quality products, which are value added. They focus on keeping consistency and people will buy.

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Imtiaz

May 05, 2017 07:10pm

Depreciation of rupee will make fuel imports costlier thus negating any benefit of increased imports. As Pakistan imports more than 80% of its fuel needs govt should work to strengthen the rupee.

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IAB

May 06, 2017 11:13am

@vikas : With China entering Pakistan through CPEC , all our local industry is destined to doom unless the laws and rules are scrutinized to support the local industry. Not too sure of exports as the Chinese will take up most of our goods as raw material .......

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Multani

May 06, 2017 10:28pm

PKR should depreciate by at least 10% as its present level of valuation is supported through multiple interventions. The over-valuation of the PKR is the primary reason for decreasing exports. The corrected value of PKR (without SBP intervention) should be about Rs.116-118. This pricing shall be beneficial for all sectors of the economy to grow.

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