Pakistan’s federal finance minister, Ishaq Dar, has promised the spiraling price of the dollar will be reined in and brought back to the level of 98 rupees (Rs) per US dollar.
When Pakistan Muslim League-Nawaz assumed charge of the government in June this year, the US dollar was available at Rs 98. However, within six months of the PML-N government, the value of dollar touched the highest mark of Rs 109 per dollar. The steep rise in the dollar exchange rate hit the Pakistani economy hard, leading to an unprecedented rise in the prices of daily essential commodities.
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To track down the promise, Truth Tracker contacted Shafqat Jalil, media director of Pakistan’s Ministry of Finance, to ask about the much-needed government plans to bring the dollar exchange rate down to the pre-budget level.
“Multiple plans are being devised at the moment to control the rising exchange rate of the US dollar,” Jalil told Truth Tracker, noting that the government was hopeful about succeeding in these plans.
He explained that the government is also expecting the World Bank and Asian Development Bank to provide a considerable amount in the current fiscal year, which would enable the government to overcome the currency crisis and boost foreign reserves. Additionally, Jalil said, the government has reached an agreement with a consortium of banks for borrowing $625 million for oil payments and financing of the budget deficit.
“The government has already received $200 million from the [banks] consortium and the remaining amount would be available as and when needed for oil payments,” Jalil said. “Some friendly countries would also provide soft loans and aid to Pakistan in the coming months.”
Jalil said the dollar exchange rate would be easily brought down to Rs 98 if all the proposed measures are carried out as planned by the finance ministry and the government. Pakistan Tehrik-e-Insaf leader and National Assembly member Asad Umar has said the government has devalued the rupee as per an agreement with the IMF.
“The situation (devaluation of rupee) has resulted in skyrocketing inflation and rampant unemployment,” Umar - considered to be the economic brain of PTI - told Truth Tracker. “A fall of one rupee against the dollar costs 70 billion rupees to Pakistan’s economy,” he said, and noted that the country’s economy cannot be improved until the government takes steps to widen the tax net.
According to Umar, the government cannot bring down the dollar exchange rate under the prevailing circumstances.
“This is the crucial moment for Pakistan economy and can be improved only if the government creates an enabling environment to bring foreign investment into the country,” he added.
A leading economic expert, Sakib Sherani, said the dollar exchange rate is directly linked with demand and supply like other commodities.
“Besides demand and supply, the dollar exchange rate is also linked with the country’s foreign reserves,” Sherani told Truth Tracker.
Sherani said Pakistan’s foreign reserves were continuously shrinking due to balance of payment on account of trade, adding that “with decreasing foreign reserves demand for dollar is on the rise, leading to a sharp increase in the rate of the green buck against the Pakistani currency.”
There is way to bring down the dollar exchange rate, Sharani said. He said the government should take steps to increase the foreign inflows or remittances in the coming weeks and months. According to Sherani, the remittances are already coming according to the schedule, but the foreign inflows are less likely to increase in the coming months. “Hence the government’s wish to bring down the dollar rate may not be materialized,” says Sherani.
Another noted economic expert and dean of the Business School of the National University of Science and Technology, Dr. Ashfaq Hassan Khan, agrees with Sherani.
“The government cannot improve dollar-rupee parity unless a huge amount is injected into the national kitty through foreign inflows,” Khan told Truth Tracker.
He said foreign investment in Pakistan had almost shrunk to zero due to poor security and acts of terrorism. “It is not possible for the government to bring the dollar exchange rate down to the pre-budget level of Rs 98,” Khan said. According to Khan, the government had an understanding with the International Monetary Fund (IMF) under Extended Fund Facility Program that the Pakistani rupee would be allowed to depreciate until it reached Rs 110 against the US dollar. “It would be a major achievement even if the government succeeds in keeping the dollar rate at Rs 105…as bringing the rate down to Rs 98 is nothing less than a dream,” Khan said.
Considering the government’s position on the dollar exchange rate, views of a lawmaker from an opposition party and independent economic experts, Truth Tracker rules that the promise is under way.
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