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‘Political tensions disturbed stocks, rupee-dollar parity’


KARACHI: The prevailing uncertain political situation in the country has impacted negatively on the economic front besides hitting stock markets and pressurised local currency against greenback, said Hamza Malik Director Monetary Policy Department Satae Bank of Pakistan (SBP).
The depreciated of rupee against dollar was significant as it settled at nearly 101 in the interbank market but the crisis on the political scenario caused huge panic in the money market that could lead to unfavourable impacts on the economic side if the central bank did not inject dollars through market operations.
The inflows and outflows of dollar have been back on normality but the nervousness of the investors and businesses have set the situation of the market at risk, which could trigger the situation towards bad.
The role of central bank is crucial to maintain the exchange rates because it enhances the debt values directly and increases the pressure on foreign exchange reserves of the country as well.
The government plans to privatisation and issuance of Euro bonds and Sukuk are likely to bode well for the exchange rates in the comfortable zone because it will improves the level of foreign exchange thereby stabilising rupee against greenback.
Euro bonds and Sukuk will likely to attract more than $1 billion whereas the privatisation of Oil and Gas Development Company Limited could fetch up to $800 million to the national kitty, he mentioned the estimated projection of the government and market analysts.
Director SBP repelled the impression the tightening of the discount rates enhances debt burden saying the discount rate was set on the extensive calculation, which did not push up loans values. The role of central bank is very crucial in maintain the price stability and financial stability in order to keep the economy towards growth because these are the two benchmarks upon which investors and businessmen relay to make decision with financial estimates, Malik said. The money supplies and its impact on inflation could be controlled with discount rates hence it is being driven into the same fashion.
The accumulation of the foreign and external debts is being taken place because the expense of the nation is far ahead of the revenues it generated from the sources. Resulting, the deficit in trade is huge that cause evaporation of foreign exchange reserves of the country.
Trade deficit stood more than 7 percent since 2007-08 however it came down to 0.3 percent to the Gross Domestic Products (GDP) by the end of 2013-14, he said.
Tax-to-GDP ratio normally falls below 10 percent should be increased to finance the import bill to contain trade deficit. Otherwise, the climate of the business should be made conducive in the country so foreign investors and businessmen bring their investment to the national kitty, which maintain the foreign exchange reserves and exchange rates, Malik added.

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