Newly appointed Finance Minister Ishaq Dar expressed his confidence to stabilize the rupee and bring it below Rs200 against the US dollar. The rupee is now trading at about 227 per US dollar, and the currency has been volatile, plunging as much as 30% this year.
In an interview to a local media channel, Ishaq Dar said, “the rupee’s real value is less than 200 (to the dollar), and God willing, it will fall below 200 (rupees).”
He went on to say that the rupee would be restored by “policy” of the government because the current rate was inflated owing to speculation.
Dar, who was inducted as finance minister for the fourth time last week, has previously advocated for interference in currency markets.
The rupee has strengthened since Dar took charge. According to central bank estimates, Pakistan presently has only $8 billion in reserves, which is barely enough to cover a month’s imports, making market intervention via currency injections impossible.
After agreeing to tough measures, the country was only recently able to revive an International Monetary Fund (IMF) bailout programme.
“I have been dealing with the IMF for the last 25 years; I will deal with it,” he said, referring to any potential reservations by the lender.
“It is my responsibility now to face the IMF but not Miftah or anyone else. It was not the summary for hiking the prices but it was about a lower rate of reduction,” he added.
One of the agreements called for the implementation of a market-determined currency rate and the cessation of government intervention in the central bank.
Controversy on decline in fuel prices
Ishaq Dar also defended his decision to cut fuel prices just days after assuming office, reversing a policy of rising prices monthly through additional levies to secure more revenues as agreed with the IMF.
Earlier, Miftah Ismail had termed the coalition government’s decision to not increase the petroleum development levy (PDL) this month without International Monetary Fund’s (IMF) approval, “reckless”.
1. Shaukat bhai but you did violate the agreement you made with the IMF. You agreed to increase Sales Tax to 17% but reduced it to zero. You agreed to raise Petrol Levy every month by Rs 4 to Rs 30 but brought it to zero. You agreed to not give amnesty but gave one anyway. https://t.co/UfEe4JJfcS
— Miftah Ismail (@MiftahIsmail) October 2, 2022
He clearly said, “Pakistan will not face any negative result as I have some other solutions. However, it is a wrong move to make such a statement publicly as he should contact me first then I will tell him about solutions.”
Dar showed his concern with the inflation and flood hit people saying that adding further levies was not justified while the country was dealing with catastrophic floods that killed over 1,600 people and caused at least $30 billion in damage.
I cannot impose a levy of Rs5 each on petrol and diesel in this situation,” Dar said.
On Monday, the IMF said policy discussions, including how to target support to those affected by the floods while maintaining macroeconomic stability, will commence in coming weeks after the damage assessment report becomes available.
“Policy commitments made by the Pakistani authorities as part of the Seventh and Eighth review under their IMF-support program continue to apply,” IMF’s resident representative in Islamabad Esther Pérez Ruiz told Reuters in response to a question if the cuts had been discussed with the lender.