KARACHIThe business community has warned the government of a further widening of the trade deficit due to the sharp increase in the import bill in the first half of the current fiscal year, a statement said on Saturday.
Business Panel Chairman Mian Anjum Nisar warned the government against a relentless increase in the trade deficit, which widened 106.4% in the first half of the current fiscal year 2021/22, now the local currency under pressure, which is back to its depreciating trend against the dollar, after remaining stable for a few days.
Nisar, also a former president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), urged the government to control the volatility of the rupee against the dollar, which is not possible without monitoring the increase. of the trade deficit, putting industrial recovery and economic growth threatened.
The trade deficit in the first six months (July-December) reached $ 25.478 billion, compared to $ 12.34 billion recorded in the same period of 2020/21, he said, adding that the Last week the rupee closed at an all-time low of Rs178.24 against the dollar before appreciating over the next two days to end the year at 176.51.
He was of the opinion that the State Bank of Pakistan (SBP) should remain vigilant in this regard and, together with the government, should step in and propose political reforms to control the depreciation of the rupee.
The chairman of the FPCCI Businessmen’s Group said that in addition to increasing exports and controlling imports, the government will need to take administrative measures, as there are high demands for cash dollars in the market.
He appreciated the fact that the country’s exports rose 24.7 percent and remained at $ 15.102 billion in the first half of the current fiscal year, noting that imports also soared by 65, 94 percent to $ 40.58 billion, which is alarming.
If the increase in imports continues, the depreciation of the rupee cannot be avoided, he warned and suggested providing incentives for the industry to continue to increase its exports. If the situation persists, the interest rate could rise further as the import bill rises, he added.
The rupee’s depreciation comes despite the SBP’s latest move in which it changed foreign exchange regulations for exporters. During the week, the central bank said it would reduce the period of export earnings to 60 days, and exporters will be required to report export earnings within a maximum of 120 days from the date. shipping, but the new measure has not had a positive impact so far, he said.
The SBP believes that a flexible exchange rate has appropriately played its role as a shock absorber and it is important that its role is complemented by strong realization of exports, he added.
This indicates that the pressure on the rupee is steadily increasing, he said, stressing the need to design a warlike strategy to increase foreign investment in Pakistan in order to stop the bullish trajectory of the dollar.
He observed that the flexible market-based exchange rate system, resilience of remittances and other factors can help contain the current account deficit within a sustainable range of 2-3 percent of GDP over the course of of exercise 22.
He said the dollar’s rise does not make sense despite the State Bank claiming Pakistan’s external position was at its strongest with a current account deficit of 0.6 percent.
He stressed the need to continue to encourage export-oriented sectors in order to take exports to the next level, adding that it is undeniable that the government has faced many economic challenges in addition to other problems and internal and external problems over the past three years.
He said the textile industry has maintained its leading position in exports and is the lifeline of Pakistan’s exports, which would be further increased after government assistance to this sector. With the troublesome issues resolved, he hoped that the export share could increase further in FY21/22.