Pakistan needs to take both immediate and long-term steps to stop the free fall of Rupee as the weak currency is undercutting economic prospects, a Pakistani-American business leader says.
Mossadaq Chughtai, who runs enterprises in both the United States and Pakistan, says since Pakistan has a ballooning gap between imports and exports, currency devaluation could lead to hyper-inflation, putting a squeeze on purchasing power of people.
“Rightaway, it is the government financial institutions have to act immediately in reversing the free fall of Rupee,” Mossadaq Chughtai said in an interview while speaking in the backdrop of a $6 billion IMF bailout package that has plunged the stock market confidence.
The Pakistani currency has plummeted against the U.S. dollar to the unprecedented level of Rs 154 equaling one dollar. Analysts now say the soaring dollar price may further widen the trade deficit, raise import costs and exacerbate oil prices.
Pakistani-American entrepreneur Mossadaq Chughtai and Congressman Brad Sherman
Image Credit: Views and News
“All this will jack up the input cost, badly affect export-oriented industries, and scuttle growth,” Chughtai said.
According to the entrepreneur, a weaker rupee benefits exporters only by giving them more rupees per dollar, but this benefit is neutralized by higher cost of imported raw materials when converted in rupees and also by expensive manufacturing sector machines and products.
The key textile sector will suffer, he feared.
He said the economy was already under tremendous pressure owing to a number of internal and external challenges that have been a drag for the last many decades.
“But these challenges have not been addressed, and now Pakistan’s business and industry run the risk of losing their promise.”
.He appreciated Prime Minister Imran Khan and Adviser Dr. Hafeez Sheikh’s efforts to help arrest the capital flight from the country”.
He stated “the dollar-rupee parity could only be improved by increasing the exports and encouraging the remittances by overseas Pakistanis with a meaningful long term strategy.
Karachi Port, Image Credit: Sana Sneha/Wikimedia
This strategy must include attractive incentives for remittances as well as a solid implementable plan to export skilled manpower to various needed countries.
“It is very simple math, the dollar will not spike if the sum total of the exports and remittances is more than the value of imports,” Chughtai said.
The panic measures like hike in interest rates will not help and both immediate fixes and long-term reforms must go together and start right now, he argued.
“The climbing interest rates will badly affect the industrial sector and their profitability. It reduces their ability to re-invest in the respective or other manufacturing sectors. The policy makers in Pakistan must remember that economies of the nations only thrive when businesses and industries of those nations make profits. Reducing regulations and taxes, have also boosted their economies.”
“But it’s never too late to rectify, and the Government’s targeted intervention still can keep rupee-dollar parity a reasonable level,” he added
