ISLAMABAD: Due to the decline in foreign exchange reserves and remittances and the possibility of a rapid increase in inflationary pressure, the steady decline of the rupee against the dollar is heading towards disaster.
Now, such a depreciation in the exchange rate will result in an increase in POL prices and an increase in the Fuel Price Adjustment (FPA) after furnace oil and imported regasified liquefied natural gas (RLNG) become available. The same shall apply in case of More dear in the coming months.
Headline inflation is expected to rise further as well as core inflation so the policy rate will also be increased under International Monetary Fund (IMF) terms.
A doomsday scenario is looming large due to slowing GDP growth and rising CPI-based inflation in the coming months. The ultimate victim will be the poor sections of the society as stagnation will increase poverty and unemployment.
Continued depreciation of the exchange rate due to import clearance, payment of dividends and increased demand for dollars to implement the structural benchmark condition under the IMF’s $3 billion standby arrangement led to a decline in the interbank rate for the US dollar. 300 has exceeded Rs. SBA) to keep the spread between interbank and open market not more than 1.25%.
The structural benchmark has now been broken, as the gap is around 4.5 to 5%. But the State Bank of Pakistan (SBP) is not ready to say anything on record. The same is the case with the finance ministry after the caretaker setup took over. When the State Bank’s official spokesperson was queried about the continued depreciation of the exchange rate, the reply was “no comment”.
At least, during the PDM-led government, then Finance Minister Ishaq Dar had always preferred to flex his muscles against speculators but no one seemed in a mood to comment on the current situation. coming
The Ministry of Finance has so far only issued a statement saying that Caretaker Finance Minister Dr. Shamshad Akhtar has reached Q Block and taken charge.
Caretaker Prime Minister has appointed Dr. Shamshad Akhtar as Finance Minister and Dr. Waqar Masood as Advisor on Finance with the post of Minister of State, but no division of work has been done so far for assignment of responsibilities.
Collective responsibility is no longer a solution because it will not help determine key performance indicators (KPIs). Therefore, responsibilities need to be divided so that at the end of the day someone can be held accountable.
In the current tough economic environment, the current account deficit widened to $1 billion for July 2023 on the back of lower exports, remittances and rising imports.
A widening gap between interbank and open market rates will further reduce the likelihood of remittances being lured. On the domestic front, FBR’s revenue collection has also lagged behind the growth required to meet the annual target of Rs 9.4 trillion.
