Pressure will ease as imports have gone down: Miftah Ismail

Finance Minister Miftah Ismail reiterated confidence that pressure on the rupee will decline, a statement that comes as the local currency continued to hit record lows against the US dollar and endured its worst weekly fall in over two decades.

In an interview with Radio Pakistan, the finance minister said that pressure on the rupee is due to the political environment as well as the fact that import payments are being made for shipments from June.

“Import of $80 billion were made during the last fiscal year. We are still making payments for energy commodities purchased last month. Therefore, the rupee is under pressure. However, as we are importing less in July, its effect would be reflected from next month or, I should say, next week.

“The rupee’s fall is connected to the political situation as well. Before July 17, the situation wasn’t like this,” he added.

The rupee has remained on the receiving end against the greenback, losing 7.6% to the US dollar last week, more than what businesses tend to keep in mind over the course of a year in terms of annual currency depreciation, as renewed political uncertainty and heightened concerns over Pakistan’s external financing needs saw the inter-bank market go through a tumultuous five sessions.

Responding to a question, Miftah also said Pakistan is expected to receive the next tranche of the International Monetary Fund (IMF) by the end of next month after the board meeting.

“$4-5 billion are also expected from friendly countries,” said Miftah, adding that one friendly country is ready for immediate investment in the country.

Elaborating on the economic problems of the country, Miftah pointed out that the low export base remains a point of concern.

“The country’s exports are very low. At one time, our exports used to finance 45-50% of our imports, which has now decreased to 39% financing last year,” the minister said.

“Thus, the demand for dollar remains very high, while its supply is low, which leads to two outcomes. The State Bank has to pay from its foreign reserves or the rate of rupee declines,” he said.

The minister said that the only solution to end this cycle is to moderate growth and reduce the demand for dollars. “This is achieved by reducing the imports, as one cannot increase its exports immediately,” he said.

Miftah expressed that increasing exports could be challenging in view of the looming recession in the West, saying that the country needs to put in more effort to bolster its exports.