Finance Minister Miftah Ismail on Wednesday blamed the political turmoil for the economic downturn as the rupee hit a record low of 225 in the interbank market on Wednesday.
“The panic in the market is primarily due to political turmoil, which will subside in a few days,” Ismail told Reuters. He added that he expects pressure on the rupee to fall in the next few days.
On Tuesday, he said it was the coalition government’s “priority” to save Pakistan from defaulting after the rupee hit an all-time low against the dollar and the stocks battered during the day’s trade.
The recent slide in local currency is the highest day-on-day depreciation after June 26, 2019, while the benchmark KSE-100 index closed at 40,389.07 points in a 20-month high.
Analysts said that the political uncertainty arising after the Punjab by-polls, the International Monetary Fund’s (IMF) delay, and the shirking forex reserves had adverse impacts on the market.
The finance minister, during an interview on Geo News programme “Aaj Shahzeb Khanzada Kay Saath,” also voiced the same concerns, saying that the rupee’s depreciation was not currently linked to supply and demand.
He added the rupee was continuously falling due to political instability, gambling, and speculations. But at the same time, he said that the danger of default was not looming over Pakistan.
The finance minister credited the coalition government’s tough decisions for avoiding default — raising petroleum products’ prices and power and gas tariffs, among other fiscal measures — that paved the way for the crucial staff-level agreement with the IMF.
The rupee continued its fall in the interbank market on Wednesday, with the local currency sliding to a historic low of Rs225 against the dollar as Finance Minister Miftah Ismail said political turmoil was to blame for the downturn. https://t.co/CnrQxI2fex
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To secure the IMF loan, Prime Minister Shehbaz Shehbaz imposed three fuel price hikes cumulatively totalling 50%, raising the electricity cost to end the subsidies introduced by Khan effectively.
But recently, after the IMF deal was secured, the government decreased the price of petrol by Rs18.50 per litre and diesel by Rs40.50 per litre.
Ismail said if the government gets fiscal space, it will reduce the price of petrol further.
Moreover, the finance minister assured that the government was targeting to overcome a major hurdle of the current account deficit and reduce it while at the same time increasing exports so that the pressure on the economy subsidies.
He said that if the current government continues its tenure, it would be a good sign for Pakistan as it will bring stability.
Ismail added that despite instability, the economy’s roots had “strengthened” over the last four months.
The finance minister also noted that the government needed to take unpopular measures, resulting in political setbacks, as the PML-N lost Punjab to PTI in the by-elections.
“But if need be, we will take more tough decisions,” he said.
He said that the loan from IMF would soon be received, and following that, friendly countries would also lend a helping hand to Pakistan.
With input from Geo News