Ali Khizar, an economics journalist took to Twitter to say that the threat by Deputy Governor State Bank of Pakistan (SBP) to market speculators worked right away (in the immediate term). PKR/USD is trading below 168.
— Ali khizar (@AliKhizar) September 16, 2021
Many experts last night took to Twitter to mention that the Deputy Governor SBP Dr. Murtaza Saeed had warned speculators in a private TV show named “Dunya Kamran Khan Kay Saath”, hosted by anchorperson Kamran Khan.
Kamran Khan uploaded a short clip of Dr. Saeed explaining the crisis, in which latter explained the reasons for the rupee devaluation.
رپے کی گراوٹ پر بڑی پریشانی نہیں ڈپٹی گورنر SBP مرتضی سید کہتے ہیں " سٹے بازوں نے پہلے بھی نقصان اٹھایا آئندہ بھی اٹھائیں گے" اسٹیٹ بینک مطمئن ہے Forex reserve ڈالر دو سالہ Average ریٹ سرکاری اوپن مارکیٹ ریٹ قابو میں ہیں ڈالر کی غیر معمولی طلب کو SBP-FIA قابو میں لائیں گے pic.twitter.com/PNbtzyfK0G
— Kamran Khan (@AajKamranKhan) September 16, 2021
Dr. Saeed said, “We at State Bank are watching the developments very closely and we believe that there are some fundamental factors for the devaluation of the rupee.”
“Our trade deficit has increased because the economic growth in the country is picking up, and along with that, international commodity prices are rising, impacting the import bill, he said, adding, “and then if some people start speculating, they must remember that they will be the losers at the end of the day.”
Deputy Governor State Bank said that it is the policy of the institution to not allow panic to be created in the Foreign Exchange market, and if that happens, the central bank will intervene.
Currently, the SBP is loosely monitoring the FOREX market to ensure that the supply of the US dollar in the market is consistent and is watching that there is a low premium between the curb rate and interbank rate.
Dr. Saeed said that if we look at the average exchange rates between Calendar year 2020 and calendar year 2021, we see that the average has fallen Year-on-Year and reiterated that the bank believes that the current system is going well, and better than the previous system.
He at the end again warned the speculators that they will lose money at the end of the day, as the system is not the same as before, and it seemed to have worked as the Dollar is seeing some dip.
Shaukat Tarin to Dawn
In his interview with Dawn on 12th September, Finance Minister Shaukat Tarin had blamed the rupee devaluation on the artificial demand of dollars created by speculators. However, he conceded that there is pressure on the exchange rate mainly because of speculation over the balance of payment issues because of the rising import bill.
“This is not sustainable and has no base for support,” Tarin said, warning speculators and predicted it will come down. He added that the speculators will get temporary benefits because of the pressures on the rupee.
“The State Bank of Pakistan is watching the situation and will intervene when required,” the minister told Dawn. However, he did not define any yardstick which would tell when the central bank will intervene.
Express Tribune economic journalist Shahbaz Rana wrote on Wednesday that the State Bank of Pakistan has been injecting USD in the interbank market for over a few months now, in a bid to stabilize the rupee, and has put around $1.2 billion in the market.
It is worth mentioning here that it is against the current regime’s policy and IMF policy for countries in its programs to conduct such sales. Economic Journalist Khurram Hussain wrote that even if these sales happened, “the pace of activity in the foreign exchange markets will likely accelerate in the days ahead. And as it accelerates, keeping the rupee below the threshold of 170 will become harder and harder.”
According to analysts, the Pakistani Rupee has overshot expectations, and according to Exchange Companies Association of Pakistan’s former secretary-general Zafar Paracha, it will bounce back if the incumbent government has not made any commitment to let it depreciate.