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Minister says resumption of $6b IMF loan programme will strengthen rupee against dollar
Salman Siddiqui November 15, 2021
Shaukat Tarin speaks at a meeting in Washington in 2009. PHOTO: AFP
Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin sees a definite role of speculators in devaluation of the rupee beyond Rs170 against the US dollar in the inter-bank market, asking the central bank to play its role in the matter.
Pakistan and the International Monetary Fund (IMF) have renegotiated to soften conditions to resume the $6 billion loan programme and almost reached an agreement to resume it. The IMF would soon announce the resumption of the programme. Besides, Pakistan has inked an agreement with Saudi Arabia that was a must to receive the promised $3 billion deposits into the State Bank of Pakistan's account from the kingdom.
To recall, the rupee hit an all-time low of Rs175.73 against the greenback in the inter-bank market on Friday, according to the central bank's data. It plunged to Rs178 in the open market.
Read: Rupee drops to historic low
"You are asking, is there any element of speculation in the rupee's devaluation. It definitely is … speculators are taking it [dollar] up," Tarin said while talking to the media persons after performing the groundbreaking ceremony of Naya Nazimabad Hospital on Sunday.
The prevailing real effective exchange rate (REER) – Pakistan's cost of trade with the world – at around 93, 94-point suggests "the rupee should stay around Rs166-170 these days," he said.
"Rupee has become undervalued. Speculators have taken [unduly pocketed] Rs8-9 a dollar," he said.
Besides, Afghanis are buying dollars from Pakistani markets and transferring them to their country. "We have to fix it," he said.
He said the rupee would partially recover against the US dollar once the IMF announces resumption of the loan programme. "The speculators would take a hit (of Rs8-9) once the IMF programme resumes.
"I have asked the State Bank the [rupee-dollar exchange] rate should move both sides. Otherwise, speculators would play [manipulate]."
He said Pakistan's previous economic team has "gotten their hands cut in March", when they last time negotiated with the IMF to resume its programme. "We (Pakistan) have said no to a number of IMF conditions. You will see it [programme] has significantly been improved."
Read More: No breakthrough with IMF on SBP autonomy issue
Earlier, while addressing the audience at the ceremony, Tarin said a persistent delay in resumption of the IMF loan programme is creating uncertainty. Pakistan and the IMF have almost reached an agreement to resume the programme for which the two sides are engaged for over a month now.
"I cannot announce it, but the IMF would [announce resumption of the programme]. You will hear the good news soon. This will remove the uncertainty," Tarin said.
He said he was aware that sugar hoarding had caused the "price of the sweetener to shoot up to the skies" in the country. "Hoarding is a big issue. We will confiscate hoarding, arrest hoarders and pay 10% to those who would inform about the boarding. I will announce in a few days … whistleblower would get 10%."
He said he had asked the Competition Commission of Pakistan (CCP) to check cartelisation in edible oil and ghee industry.
"I monitor edible oil price myself. They have doubled in international markets and yet to come down. But you are right, cartelisation is there, I have asked the CCP to check it in the ghee industry," he said.
"We have to strengthen the CCP because there are numerous things we have asked. They delayed it [strengthening] due to cumbersome procedures. We have to fix that. Whenever there is cartelisation, there should be immediate action. We speak more and act less."
He said the petroleum prices have doubled to $85 per barrel in the international market and the government has no option but to pass the increase on to local consumers if prices maintain an upward trend in future.
"We have reduced sales tax on petrol to 1.6% to keep it affordable as compared to 17% in the recent past. We have no room now to absorb the increase. We have to pass the increase in price on to local consumers if the upward momentum continues in the international market."
Read More: Tarin rules out 'further' relief on fuel prices
He said Pakistan would achieve economic growth of over 5% in the current fiscal year 2022. "Collection of revenue in taxes has gained momentum and remained higher than the set target. Current account deficit is also under control and foreign exchange reserves are rising."
Imports would be 25% of the GDP, while exports would be around 10%. The imports are being financed through export earnings and through inflows of workers' remittances and Roshan Digital Accounts (RDA), he said.
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