Rupee Resilience Spurs Optimism For National Economy

Muhammad Aslam & Muhammad Asad

Islamabad: The Pakistani rupee has showcased remarkable resilience against the US dollar despite macroeconomic challenges and the slow progress of fiscal indicators. Experts believe this would have a positive impact on the national economy.

The caretaker government on September 6 announced a massive crackdown against the elements involved in dollar smuggling, hoarding, and organised crime cartels, causing losses to the national economy.

By adopting a ‘zero-tolerance’ stance towards smuggling and hoarding, the Pakistani rupee started gaining against the dollar, and since September 5, it witnessed around Rs 24.41 appreciation and Rs 282.68 in interbank trading during 22 consecutive recovery sessions, as of October 6.

In line with its strategy, the government has also planned prize money (a cash reward) for those citizens who provide information leading to the identification of elements involved in smuggling and hoarding.

For this purpose, a toll-free number has been set up at the Federal Investigation Agency (FIA) and the Ministry of Interior to call and share the required information against the elements involved in illegal activities that cause a dent in the national economy.

Official sources said that strict action is being taken after the identification of facilitators and patrons of government officials who indulged in illegal economic activities. “Major policy reforms are underway. Commodity and currency trading will be changed.”

The complete lists of the elements involved in illegal economic activities are ready, and accordingly, an extensive crackdown is underway, they added.

The main reason to initiate and enforce administrative measures against hoarders, black marketers, and dollar smugglers is the constant devaluation of the rupee against the US dollar, revealed sources.

Whereas, the sources said surveillance systems are being upgraded at land, sea and airports, adding, “Illegal movement of goods and currency will not be allowed.”

On September 5, the rupee against the dollar in interbank trading was at Rs 307.09, and by October 6, it had come down to Rs 282.68, the price of the Euro declined to Rs 298.03 from Rs 330.13, the British Pound to Rs 344.73 from Rs 385.22, the Emirate Dirham to Rs 76.96 from Rs 83.60, and the Saudi Riyal to Rs 75.37 from Rs 81.87. Whereas the buying and selling of the dollar in the open market came down from Rs 320.8 to Rs 280 and Rs 324 to Rs 282.75, respectively.

Experts believe that all economic indicators will start moving in the right direction once the Pakistani currency gains its real worth, strength and stability.

Economic Affairs Federal Minister Dr Shamshad Akhtar said that the foreign exchange reserves position is stable, and exchange company reform and anti-smuggling operations did stabilise the rupee. “This stability came without any bank intervention,” she added.

The measures being taken for the value of currency include strengthening the regulatory rules for exchange companies, along with the ongoing measures for smuggling and hoarding of foreign exchange because no country can allow playing with the currency, further stated Dr Shamshad.

Commerce Federal Minister Dr Gohar Ejaz mentioned that one of the causes of the depreciation of Pakistani currency was the smuggling of transit goods from Afghanistan to Pakistan which has risen from $4 billion to $6.7 billion.

Around $500 million that was earned by Pakistanis overseas was financing Afghan transit, Dr Ejaz added.

Commerce Minister told that without any intervention by the State Bank of Pakistan (SBP), the dollar went down to Rs 280 from Rs 330 due to government measures and a crackdown on hundi-hawala set-ups.

The appreciation of the rupee was also acknowledged internationally as Bloomberg in a recent report said Pakistani currency was set to become the top performer globally in the last month (September).

“Many leakages were happening through illegal channels of hawala and hundi trade from the open market,” said Alpha Beta Core Solutions Chief Executive Officer Khurram Schehzad.

The dollar rate reversed and everybody, including hoarders and exporters who were holding their export proceeds, started selling their dollars, Khurram added.

Meanwhile, the SBP has decided to introduce structural reforms in the exchange companies’ sector as part of these reforms, following which leading banks have actively engaged in foreign exchange business by establishing wholly owned exchange companies to cater to the legitimate foreign exchange needs of the general public.

Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Sultan Paracha confirmed that the crackdown against smugglers and hoarders of dollars had a “highly positive impact.”

“The Pakistani rupee has witnessed a significant appreciation of around Rs 45 against the dollar due to government initiatives. Currently, the rupee stands at Rs 287, and the target is to bring it down to Rs 250 to Rs 260,” Paracha remarked.

Zafar further said that several exporters, who had previously halted payments due to the significant gap between interbank and open market rates, have now resumed releasing the amounts.

General Secretary also highlighted that this trend is expected to continue in the coming days due to the increasing supply of dollars and decreasing demand.

The gradual reduction of the significant gap between interbank and open market rates has encouraged overseas Pakistanis to utilise legal channels, such as banking, to transfer dollars to the country. Therefore, there has been a surge in daily remittance inflows, Zafar Sultan added.

Economist Muhammad Suhail observed that the winning streak of the rupee will depend on future economic fundamentals. “In the short run, we may see the PKR strengthening due to ongoing measures taken by the regulators for compliance with laws,” he added.

The feature is released by APP.