Govt gives in to IMF ask

ISLAMABAD: State Bank of Pakistan (SBP) Friday allowed US dollar to appreciate by Rs8 in open market to Rs141.5 and close to Rs5.60 in inter-bank market to Rs139.1, top official sources told The News.

They said that dollar value will ultimately settle somewhere between Rs145 and Rs150 if Pakistan reaches the deal with IMF, as anther devaluation is on cards. Major financial and economic centres are also predicting that dollar rate is being raised to show the IMF that government is committed to take bailout package.

“State Bank of Pakistan can never allow massive devaluation of Pak Rupee without the nod of the Finance Ministry. So it is a deliberate step to send the signal to IMF that it is ready to accept the stern conditions for $6-7 billion package,” they said.

The Fund’s staff mission during the talks that ended on November 20 had asked Pakistan to increase power tariff by 22 percent, and had also suggested the government to let market forces determine value of US dollar. During talks, the value of dollar was at Rs134 and the government has now increased it to Rs139.5 in inter-bank market, which will trigger new wave of inflation. However, from May 2018 till now (November 30, 2018), the country’s external debt has swelled by Rs3.325 trillion out of which almost Rs1.4 trillion debt has been jacked by in the PTI era just on account of Pak Rupee devaluation. The latest plunge of Rupee against dollar by 3.75 percent will increase the inflation up to 8.5 percent from existing 7 percent.

Price of tea, edibles, pulses will increase manifold within no time. Discount rate has increased to 10 percent with dollar appreciation by 3.7 percent.

“The IMF staff mission will present its report about Pakistan economy before the board of directors in the month of January. The government has devalued the Pak rupee in latest development,” the sources said.

However, a Finance Division official said that Pakistan has factually nothing in its pocket. “Our reserves stand at $ 8 billion out of which the government needs to pay off $6.5 billion to international creditors so Pakistan has negative $4 billion in reserves, which is why the Pak Rupee has massively declined in a day,” the official explained. More importantly, the country is facing deficit of $30 billion. He said, “So the demand and supply mechanism has adjusted the new exchange rate.”

The official admitted that in short span of 102 days of PTI government, the dollar has appreciated almost by Rs16 owing to which Pakistan’s external debt has increased by Rs1.4 trillion.

Dr Hafeez Pasha, an eminent economist, found himself shocked over spike of dollar value just a day after listening to Prime Minister’s intending steps to get country out of economic morass. He said that this is second huge devaluation of Pak Rupee as one month back the dollar had also gone up just in one day by almost Rs10.

The latest devaluation will add fuel to inflation by 1.5 percent up to 8.5 percent. More importantly, the cost of LNG, petrol and coal, which is used for electricity generation, will also surge.

Dr Asfaque Ahmad Khan, an economist, lashed out at the economic managers’ team for jacking up dollar value. He said it should have been at Rs124. Khan said he didn’t favour devaluation of Pak Rupee. He said that it is noticed that developing economies cannot take advantage of the devaluation as imports become costly. He added the manufacturing cost increases manifold as import input in Pakistan’s local industry is 60 percent. So, Pakistani economy did not increase the exports up to the mark by taking the advantage of the devaluation of local currency in the past.