Forex to deplete further if dollar rate not raised: SBP chief

ISLAMABAD: The Governor of State Bank of Pakistan, (SBP) Tariq Bajwa, said on Thursday that foreign exchange reserves would deplete further if the dollar exchange rate against Pak rupee was not jacked up.

Giving an indication to strike an ‘equilibrium’ on exchange rate after witnessing recent adjustments, Governor State Bank of Pakistan Tariq Bajwa said that efforts were made to keep the exchange rate stable, however, there was no other way out but to adjust it accordingly keeping in view the arising economic fundamentals.

“The exchange rate adjustment was not done happily but there was no other way out. I was in contact with ministerof finance on this issue and took him on board but did not know anything about his interaction with the PM,” the SBP governor testified before the Senate Standing Committee on Finance, which met under the chairmanship of Senator Farooq H Naek here at the Parliament House on Thursday. The SBP has been projecting rising inflationary pressures in months ahead so the central bank raised its discount rates. The foreign currency reserves were also on decline, the Senate committee was told.

The SBP governor said that the exchange rate got adjusted six times during the last one year keeping in view the pressures of market forces as foreign currency reserves were on decline and the current account deficit widened to $19 billion simultaneously.

Minister of State for Revenue Hammad Azhar told the committee that the exchange rate fluctuations did not result in hiking liability of foreign debt as he made all efforts to convince senators that the loans were obtained in foreign currency and also repaid in the foreign currency. On his stance, the committee members contested him and stated that they did not agree to the claims made by the minister of state before the Senate panel.

The SBP governor told the committee that the country was dependent upon oil import and the trade deficit widened to $36 billion and it was difficult to finance such a huge gap in the absence of non-debt creating inflows such as foreign direct investments and others.

The government, he said, slapped increased rate of Regulatory Duty (RD) on 700 items through the Finance Act and its estimated value stood at $2 billion. He said that the discount rate was not jacked up for five export-oriented industries in a bid to give boost to exports.

The chairman of the committee stated that the foreign loans and liabilities were increasing at a rapid pace and the economy was witnessing a difficult situation. When inquired about the impact of recent devaluation of rupee on the economy of Pakistan, the SBP governor asked the chairman of Senate committee to hold in-camera proceedings but the committee refused to entertain his request.

Senator Ateeq Sheikh alleged that there was a need to ascertain who got benefits from recent devaluation of rupee against dollar. On this allegation, Minister of State for Revenue asked him to give proof if he possessed anything substantial.

The SBP governor also briefed the committee on hacking of bank accounts and informed it that 6,000 accounts of Bank Islami were hacked in Poland and Latvia to draw $6 million after which all banks were advised to strengthen their internal systems to secure depositors from any unwarranted episode.