Rupee depreciation to open floodgate of inflation: experts

LAHORE: Depreciation of rupee against US dollar was expected as the government had artificially capped it which has now ultimately depreciated that will open a new floodgate of inflation and affect economy.

These views were expressed by the experts at Jang Economic Session on ‘What will be the impact of US dollar appreciation against Pakistan rupee’. The panellists were Dr Yasir Mehmood, Sameer Ahmed, Khawja Khalid Niaz, and Aftab Ahemd Vohra while the session was hosted by Sikindar Lodhi.

Dr Yasir Mehmood said Pakistan never witnessed such pressure on exchange rates which it is currently facing as imports reached USD 48 billion and exports USD 18 billion which is alarming. He believed deprecation in rupee value will adversely affect economy and inflation will be out of control. He said China and India had been progressing annually at 10 and 7 percent, receptively for the last many years. He called for brining currency to its real value and lowering down power tariff to reduce cost of production.

Sameer Ahmed said rupee deprecation was expected before or after election and pressure on economy after it is natural. He said currency value was maintained with debts which further burdened the economy. He said economic indicators are suggesting another bailout programme from IMF.

Khawja Khalid Niaz said the current economic issue is the result of nonproductive expenditure of the country which wasted resources and faced economic decline. He called for strict and nonpolitical decisions to come out of the situation.

He said savings rates declined to 9 per cent from 13 per cent, besides increase in debt burden for repayment of debts. He suggested guiding the economy on right path by freezing salaries of government employees and import of luxury vehicles for public sector. He said without reducing cost of production, facilities given to trade and industry will not deliver the results.

Aftab Ahemd Vohra said depleted exchange rates will cause a new inflation storm which is already on the rise. However, in Pakistan a class exists for whom inflation and rise in prices does not matter but public at large will affect, he believed. He said appreciation of US dollar is IMF tactics while the government considers it will improve exports. He said Pakistan has competition with Indian exports which exchange rate is higher than Pakistan. He believed an increase in regulatory duty on import has not affected its volume rather it is increasing. He said deprecation in rupee will not increase the exports but increase debt burden and inflation while Pakistan is bound to comply with IMF conditions on exchange rate.