LAHORE: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Anjum Nisar on Tuesday urged the government to control rupee volatility against the US dollar, as the industrial revival and economic growth is impossible without exchange rate stability.

In a written statement, the president of the apex chamber said that Pakistani rupee continued its downward slide against the US dollar, moving in low range of Rs167-168, despite the fact that Pakistan’s current account deficit (CAD) has narrowed by 78 per cent owing to lower imports and better inflows.

He said that the CAD fell to $2.97 billion during fiscal year 2019-20 while the import bill fell by 19pc to $44.57bn during this period but rupee continued to sink. He said that the inflows of workers remittances also grew by 6.4pc to $23.12bn during fiscal year 2019-20 which should have a positive impact on dollar-rupee exchange value.

Apart from increasing exports and controlling imports the government will have to take administrative measures, as a large demand of cash dollars are seen in the market, he suggested. He said that the rupee has dropped by 2.8pc or Rs4.55 against the dollar since the start of June.

Nisar appreciated the positive development, related to imports, which have now started decreasing since the last financial year followed by the government’s initiative of imposing regulatory duties.

He said that the CAD shrank to 1.1pc of GDP in FY20 and the deficit of $2.96bn is the lowest in five years which should be appreciated but it is also the fact that the much-needed improvement in the CAD was initially achieved by compromising economic growth. Later, the Covid-19 outbreak slowed down the economy further and caused negative growth for the first time.

Nisar was of the view that State Bank of Pakistan will have to remain vigilant about the mounting recourse to foreign borrowing. “Besides this, the SBP and the government also need to intervene and come up with policy reforms to control depreciation of rupee which is becoming more and more valueless.”

Published in Dawn, August 12th, 2020