ISLAMABAD: Alarmed by the volatility brought about by the rupee’s plunge against the dollar on Friday and the government’s indecision and non-transparency regarding the International Monetary Fund (IMF) and other external loan terms, Pakistan People’s Party’s (PPP) Parliamentary Leader in the Senate Sherry Rehman said that the rupee went into a precipitous free fall, the biggest in a decade, only to stabilise hours later while the whole country was holding its breath on how the balance of payments crisis will be resolved.
She said that one day the government says that an IMF programme is needed and the next day it issues a sharp rebuke against borrowing from the IMF. This fiscal schizophrenia is disastrous for the economy, she added.
The senator said, “The government should have a better response than simply saying there is no need to panic. For the people of Pakistan surviving on paycheck to paycheck, and especially eroding daily wages, there is a reason to be anxious. With the interest rate at 10 per cent, inflation is expected to reach 12 per cent. The price of basic commodities such as wheat increased by 6.11 per cent, flour by 9.32 per cent, eggs by 20 per cent and pulses by 20 per cent, to name a few. In line with the rupee’s devaluation, incomes in Pakistan saw a drastic reduction of 36 per cent. A year ago, the minimum wage was equivalent to almost $150/month, now it is down to $105/month. This is well below the regional wage rate against the dollar which is $175/month in India and $240/month in China. Where is the relief for the working class?”
“The government, instead of assuring the market, approached the issue with its signature nonchalant style of governance. They should have presented a clear plan on what direction it intends to take the economy especially at a time when investor confidence is low. The other question is, why the sudden devaluation? It is not going to help with imports. Was this drastic devaluation done to meet IMF preconditions? The minister managed to talk about the IMF or the rupee slide without really saying anything on the subject. Why is the government not being transparent regarding its negotiations with the IMF?” asked the senator.
“Many are saying that nearly Rs300 billion will be added to the country’s foreign debt as a result of the whopping exchange rate adjustment. How will the government explain adding this to our already troubled balance of payments? The parliament and the people have legitimate questions. How does the government intend to restore Pakistan’s reserves? Improving exports and remittances are often cited as sources for the dollar supply. But if they were indeed improving, why would the State Bank of Pakistan (SBP) have to hike key interest rates by 10 per cent, to 150 basis points which is the highest in six years? SBP’s report certainly warned of tough times without glossing over reality like the government,” she added.
“For all the big talk on reforming the economy and promises of salvation from the hands of international lenders, the government has little to show for their vision. The rush to false promises has thrown the government into a serious credibility crisis with the parliament paralysed, external debt at its peak and no clear strategies or parliamentary consultations to fix the spiralling economy. We demand that the government provide transparency on the current state of the economy, its plans regarding the IMF and answer our questions in parliament,” concluded the former Senate opposition leader.