Shamshad hails exchange rate stability without SBP intervention

ISLAMABAD: Caretaker Minister for Finance Dr Shamshad Akhtar Friday said the administrative measures of exchange companies and crackdown on the smuggling of dollars had strengthened the rupee against the dollar and the IMF would appreciate these measures.

“The stability in exchange rate has been achieved without any interventions from the State Bank of Pakistan. The IMF objects if there is intervention in the exchange rate,” she said while addressing a news conference here. Minister for Energy Muhammad Ali and Minister for Information and Broadcasting Murtaza Solangi accompanied her. Dr Shamshad Akhtar said the SBP undertook reforms in regulating the exchange companies by extending the limit of $500 million instead of $200 million earlier and this move might lead to mergers with strong companies, while the administrative action against the grey market would continue.

“Therefore, we have not done intervention in the exchange rate but administrative reforms and action against the grey market have been undertaken, as no country can allow such things. In my view, the IMF would appreciate these measures,” she added.

The finance minister said she was not concerned about the IMF targets but more about fixing the difficult economic situation.

“IMF or no IMF, the FBR’s tax collection target of Rs9.4 trillion would be achieved,” she said. She said the SIFC was a positive development and termed its criticism by certain quarters unfounded.

Shamshad also supported the SBP’s decision to keep the policy rate unchanged at 22 percent.

She said there were some initial signs of economic recovery, though some of them were just beginning. “The caretaker government inherited a set of challenges after coming into power but it was not shying away and was dealing with them prudently by controlling expenditure and increasing revenues and the situation would improve this way,” she said. The Consumer Price Index (CPI), she said, had shown a decline from May figures, down from 38 percent to 27.3pc which was an important indicator that the country has started to come out of difficulty and there would be price stability going forward.

She said the country’s productive sectors had also shown improvement. “In the agriculture sector, we hope our results will be good, both in the major or minor crops and an improved agriculture will improve growth prospects,” she said.

“Some people have been complaining about the difficulties being faced by the industries. The data the government reviewed also showed there is also some improvement. As activity is picking up, the situation of industries is also improving and cement is one of them. The services sector is very vibrant at this stage and it has linkages with other sectors as well,” she added. Continuing, she said, “The SBP’s decision to maintain the key policy rate would also bring improvement, as the cost of borrowing of industries will fall.

“The government has talked to the international donors, including the World Bank and the ADB, and is trying to expedite cumulative assistance of $2 billion from the World Bank. The ADB will also fast-track its programme loan disbursement. “So the focus of our activities will be to give hope to the people and build confidence in Pakistan’s economy so that foreign direct investments starts coming. The government and the Special Investment Facilitation Council (SIFC) are taking certain steps in this regard enabling economy to enter self-sustaining growth”. “The foreign exchange reserves are stable even if they are not very high, According to my view, based on the outflow and inflows, these are quite stable,” she added.

Speaking on the occasion, Muhammad Ali said the circular debt of gas and power sector touched their peak totaling Rs5,400 billion with the gas sector debt standing at Rs3,000 billion and power standing at Rs2,400 billion.

Murtaza Solangi said the government had allocated funds for holding the general elections and whenever the ECP required, the government would provide funds for the elections.