Traders, businessmen hail rupee free-float

KARACHI: Traders and businesspersons on Thursday termed the massive dollar appreciation against rupee “realistic” and said the decision to remove the cap should have been taken earlier to ward off the economic mess.

Dollar closed at Rs255 on Thursday, appreciating by Rs25 against the rupee, recording the highest single day gain of greenback against the local unit.

The business community cautioned about the increase in inflation, which would burden the common man as well as the industry and businesses in terms of high cost of doing business. However, they said that artificially placing the cap on exchange rate would have brought more economic disaster for the country, which has already been grappling with the worst economic crisis in history.

“The decision to remove the cap was taken very late and it should have been done much before so that the country did not have experience such economic turmoil,” Irfan Iqbal Shekih, President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said while talking to The News.

Sheikh revealed that FPPCI had been asking for free movement of exchange rate for quite some time. “We asked Finance Minister Ishaq Dar to allow the free float of exchange rate,” he said, and added that capping has created a major difference between the rate of dollar in the interbank and open and black market.

It was anticipated that this difference would bring down the remittances through official channels, and the data proved it.

He said this capping also created the crisis where banks started to refuse establishing credit letters for imports as the country did not have enough reserves and nothing was coming from the external sources.

About the future of the economy following removal of cap on dollar-rupee exchange rate, Sheikh said that it was too early to predict because massive damage has been inflicted on the national economy and it would take some time to recover.

Karachi Chamber of Commerce and Industry (KCCI) Senior Vice President Tauseef Ahmed said that dollar was stopped artificially and now has reached its “fair value” against the rupee. He said that the decision to remove the cap was taken quite late; however, the business community welcomed the decision as it would help boost remittances from official channels and also aid in exports.

He agreed that inflation would rise; however, freezing the dollar artificially would have brought more economic miseries for the country as well as for the common man in the form of high prices of commodities in the coming days.

Korangi Association of Trade & Industry (KATI) President Faraz-ur-Rehman also termed the free-float of exchange rate the “right step”, and said that the situation would remain volatile for some days, but would normalise.

He said that the decision to remove the cap was taken very late, which severely dented the economy.