“IMF stimulus could stabilize the rupee and guarantee external financing programs”

KARACHI: Reviving the IMF program could unlock exchange rate stabilization and pave the way for major external financing programs by institutions such as the World Bank and the Asian Development Bank (AfDB), the Bank said on Thursday. Federation of Pakistan Chambers of Commerce and Industry (FPCCI). .

The top trade body, however, urged the government to take stakeholders on the status of implementation of the base electricity tariff hike, the impending imposition of an oil development tax (PDL) and new or additional taxes, saying these costs could hurt the business climate. bring the industry to a standstill.

“The rupee can be strengthened to its true value within a few months. However, this process should be gradual and sustainable through market mechanism,” said Shabbir Mansha, Acting Head of FPCCI, mentioning that the Real Effective Exchange Rate (REER) showed that the Rupee was undervalued up to 5-7% due to rumors and exchange rates. crunch for transactional purposes.

“Volatility is the last thing we need and we need to quell the rumors that fuel volatility in the overseas market,” he added.

He was of the opinion that an interest rate of 13.75% would not allow the economy to grow at a significant rate. “Electricity and gas prices have already made us uncompetitive when it comes to exports.”

Additionally, there have been rumors that interest rates could be raised further, he said.

The government should consult with business, industry and commerce stakeholders on how and when interest rates could be lowered so businesses can plan their coming year accordingly, he said. added.

Mansha called the drop in international oil prices 7-8% from its peak of $123 a barrel to below $110 a barrel a sign of relief for the country. “The relief needs to be passed on to end consumers in a gradual way.

He was optimistic that loans of $2.3 billion from Chinese commercial banks on favorable terms would halt the depletion of foreign exchange reserves and that the rollover of some other maturing Chinese debt would provide the government with strong support. to constitute reserves equivalent to at least two months. import coverage.

“The key lies in controlling the current account deficit to $10-12 billion, which will exceed $20 billion and more than 5% of GDP. IMF misfortune will get us nowhere.

Mansha pointed out that imposing the PDL, albeit in a gradual manner, would seriously hurt the cost of business competitiveness and fuel inflation like never before through its multiplier effect.

The acting head of the FPCCI went on to say that another major area of ​​concern in the coming financial year would be the government’s commitment with the IMF to impose more taxes to the tune of Rs 436 billion. .

He demanded that the government specify how and on which sectors the center would impose additional taxes.

Shirlene J. Manley