Monday December 11, 2023

‘IMF revival may stabilise rupee, ensure external funding programmes’

By Our Correspondent
June 24, 2022

KARACHI: Revival of IMF programme might unlock stabilisation of exchange rate and pave the way for major external funding programmes by institutions such as The World Bank and Asian Development Bank (ADB), Federation of Pakistan Chambers of Commerce & Industry (FPCCI) said on Thursday.

The apex trade body, however, urged the government to take stakeholders on board on implementation status of hike in electricity base tariff, impending petroleum development levy (PDL) imposition, and new or additional taxes, saying these costs could hurt the business sentiment bringing industry to a halt.

“The rupee can be strengthened to its true value in a couple of months. However, this process should be incremental and sustainable through market mechanism,” said Shabbir Mansha, acting FPCCI chief, mentioning that real effective exchange rate (REER) showed the rupee underpriced by up to 5-7 percent on the back of rumors and foreign exchange crunch for transactionary purposes.

“Volatility is the last thing that we need and we need to quell the rumors that drive the volatility in the foreign market,” he added.

He was of the view that interest rate of 13.75 percent would not let the economy grow at any meaningful rate. “Prices of electricity and gas have already made us uncompetitive as far as exports are concerned.”

Additionally, there were rumors that interest rate might be further raised, he said.

The government should consult with stakeholders in business, industry, and trade on how and when interest rate could be brought down so that businesses could plan their year ahead accordingly, he added.

Mansha termed decline in international oil prices by 7-8 percent from its peak of $123 per barrel to under $110 per barrel a sign of relief for the country.“The relief must be passed on the end consumers in phased manner.”

He was optimistic that $2.3 billion loans from Chinese commercial banks on favorable terms would put a halt to depleting foreign exchange reserves and roll over of a few other maturing Chinese debts would provide the government with a solid support to build reserves equivalent to at least two months of import cover.

“Key lies in controlling the current account deficit to $10-12 billion, which will cross $20 billion and more than 5 percent of the GDP. Squeezing the existing taxpayers even further; limiting commercial activities and re-imposing PDL to woe IMF will not lead us anywhere.”

Mansha emphasized that imposition of PDL, though in a phased manner, would badly hurt cost of doing business competitiveness and would fuel inflation like never before through its multiplier effect.

FPCCI acting chief went on saying that another major area of concern during upcoming fiscal year would be commitment of the government with the IMF that it would impose more taxes to the tune of Rs436 billion.

He demanded that the government should make it clear how and on which sectors, the center would impose additional taxes.