ICCI shows concerns over falling value of rupee

  • July 19, 2014
Islamabad Chamber of Commerce & Industry has shown concerns over the falling value of rupee, which after gaining some strength against the dollar has again started to depreciate and called upon the government to take necessary measures to bring stability in the exchange rate as its stability is vital for sustainable economic growth.
Shaban Khalid, President, Islamabad Chamber of Commerce & Industry said that after devaluing by around 6 percent against the dollar during the first half FY 14, the rupee had appreciated by 7 percent in the January-March 2014 period, making it one of the best performing currencies in the world. However, its value has started to fall and if this trend was not arrested forthwith, it will bring many economic woes to the country.  
It seemed that the government was manipulating the rupee depreciation just to give benefit a specific segment of the economy, which was not a wise approach. He said SBP’s third quarterly report for 2013-14 has claimed improvement in the sentiments of economy due to rebound in GDP growth, rise in private sector credit, better performance of manufacturing sector, subdued inflation outlook and sharp increase in forex reserves. Government also claims hefty rise in portfolio investment in stock exchanges, which has crossed 30,000 points while sale of Eurobond and 3G/4G spectrum has improved the forex reserve position. 
He wondered if things were heading so smoothly in the right direction, what caused the rupee depreciation which was now hovering around Rs.100/dollar after appreciating to Rs.95-96/dollar. 
He said the falling value of the rupee will have multiple negative implications for the economy including the rise in external debt liability. A 100-paisa fall in the value of rupee against the dollar adds Rs.1-billion to the external debt of $ 1-billion which means 400 to 500 paisa fall in rupee value will add Rs.4 to 5-billion to the external debt of $1 billion and Pakistan will have to pay billions of dollars more on import of oil and external debt servicing due to fall in value of rupee. It will also enhance the current account deficit as Pakistan is a net importer. 
Most of the industrial raw material, machinery and equipment are imported and stable currency will bring down the cost of imports, leading to low production cost, reduction in transportation cost of goods, lower prices of products and reduction in inflation. He termed the stable exchange rate as the backbone of trade as the volatile exchange rate slows down the process of trade, destabilizes the capital movements and shatters the investor’s confidence to invest in the country with high exchange rate volatility, which in turn slows down the process of economic growth. 
He called upon the government to take all possible measures to ensure stability in our exchange rate falling value of rupee will also make all government’s efforts to revive the economy unsuccessful and it is high time that government should give priority focus to this important matter.