PkRevenue.com – The Pakistan Business Forum (PBF) has issued a warning that the business community is likely to face further depreciation of the local currency in the upcoming fiscal year.
This concern arises from the Finance Division’s decision to set the dollar value at Rs 295 in the forthcoming budget, indicating a Rs 10 per dollar depreciation. Compounding this issue, a recent IMF report projects the rupee to weaken even further, potentially reaching Rs 328 to a dollar.
During a press briefing, PBF President Khawaja Mehboob ur Rehman highlighted the inevitability of further depreciation unless significant foreign reserves are injected into the State Bank of Pakistan or the dollar price is artificially capped. He emphasized the pressure of scheduled debt payments as a key factor driving this depreciation. The IMF has also recommended the government remove export sector subsidies and reduce import duties in the next budget. However, the Ministry of Commerce opposes a complete removal of import restrictions, stressing the need to protect the local market.
Rehman stressed that Pakistan’s weak external economy necessitates the restoration of political stability. He argued that without stability, major export-boosting initiatives are unlikely to succeed, and overseas Pakistanis may be hesitant to send more foreign exchange back home. Despite these challenges, the PBF remains hopeful and has urged the Finance Division to ensure that the new IMF package does not impose additional burdens on the business community. They emphasize the critical need for a competitive energy tariff to foster business growth.
The PBF president also underscored the importance of establishing regional trade agreements among South Asian countries to enhance the economic well-being of billions of people. He noted that Pakistan’s regional trade is currently below the desired level and needs to be addressed comprehensively. Rehman pointed out that while international relations can shift, geographical realities dictate that a state cannot change its neighbors. Therefore, fostering at least cordial relations with neighboring countries is essential.
Analyzing Pakistan’s economic performance, Rehman noted that the average annual economic growth between 2010 and 2023 has been around 4 percent, a rate he described as lackluster. This period also saw a rise in Pakistan’s total debt as a share of GDP from 55 percent to 76 percent. In contrast, Bangladesh experienced an average annual growth of 6.2 percent, with its debt to GDP ratio increasing from 30 percent to 39 percent over the same period.
Rehman argued that one of the most significant steps Pakistan could take to spur growth is to embrace trade with its neighbors, a practice that is currently minimal. He cited World Bank research indicating that Pakistan’s exports could increase by 80 percent, significantly boosting GDP and employment, if the country established normal trading relationships with its neighbors.
The PBF’s warning about potential currency depreciation reflects broader concerns about Pakistan’s economic stability and growth prospects. While the business community faces immediate challenges, strategic initiatives such as improving regional trade and ensuring political stability could provide long-term solutions to foster economic resilience and growth.
