PBF hopes fiscal space to improve as Dar becomes finance czar

KARACHI: Pakistan Businesses Forum (PBF) has written a letter to newly appointed Finance Minister Ishaq Dar, seeking measures for revival of the rupee and improvement in fiscal space.

“Rupee depreciation is mother of all evil” PBF vice president and CEO Ahmed Jawad recalled words of Dar during his last tenure in the letter.

Congratulating over his appointment, PBF CEO said the rupee had depreciated around Rs112 against a US dollar from August 2018 to September 2022.

“As a result, masses and businesses suffered a great deal, resulting in expensive imports i.e. automobile sector alone revised the prices of the vehicles by almost 100 percent,” Jawad said.

He recalled Dar’s words terming the currency depreciation bone of contention, saying the words still echoed in his mind as he looked at the current state of the country’s economy. “PBF has a very strong view that free float policy of the currency, initiated during the tenure of the PTI government was and is not suitable.”

The historic decline of rupee against the dollar was an unprecedented event that had never been witnessed before in recent history. Since 1947 until 1988, various governments approached the International Monetary Fund (IMF) four times.

However, 1998 onwards, it seemed, seeking an IMF package had become more of a custom for any government,

especially when no government wanted to reduce its expenses, the PBF letter read.

Jawad was of the view that the previous government had failed to revive the agriculture sector and to work on small and medium enterprises to make them more viable that could transform the country’s economy in a longer run. “Instead of building the capacity to pay back the loans, the government continued to borrow to service the previous loans.”

He emphasised that there was a dire need to stabilise the rupee by ending market speculation, which could be possible with a clear policy on restoration of the domestic currency and with an end to a prevailing sense of disappointment in the trade and industrial circles, Jawad added.

PBF sees the real exchange rate of the dollar against the rupee less than

Rs190.

For all practical reasons, the current depreciation cycle was a direct result of speculative trading, lack of regulatory oversight, and mismanagement of the forex market, according to the forum.

“A country like Pakistan that has a trade deficit, a strong currency is a boon, not a bane,” Jawad said.

PBF chief also urged the finance minister to fix the currency for a period of at least six months to support economic activities in the country.