KARACHI, Dec 9: Dr Salman Shah, the prime minister’s adviser on finance, has ruled out the rupee’s devaluation in view of the widening external current account deficit, over which the State Bank, the International Monetary Fund (IMF) and the World Bank have expressed concern in reports released in quick succession this week.
``We expect a slowdown in the pace of import growth with some acceleration in export growth in the coming months and prospects of Pakistan’s external financing are bright in the period ahead,” the adviser informed Dawn by telephone from Islamabad on Saturday.
He was asked to give the government’s position on the widespread speculation about the rupee’s devaluation in view of the reports by State Bank of Pakistan in its annual report for the year 2005-06 released on Dec 2 and the IMF and World Bank reports issued recently focussed on two risks of the national economy that are rising inflation and widening external account deficit. His explanation was that there was no fixed parity of Pakistan rupee with world currencies and it is adjusted by the market principle of demand and supply and hence there is no question of re-fixing the value.
“Our reserves are sufficient for six months import and we are on track to gradually reduce the ratio of external account deficit with the GDP in the coming years,’’ Dr Shah explained. He expects a large inflow of foreign funds as direct investment, remittances and from other sources.
On Saturday, the SBP too issued a statement entitled `Exchange rate likely to remain stable in the inter-bank market’. While maintaining that there is no `fundamental misalignment’ of the real effective exchange rate of the rupee and therefore consistent with recent trends, the exchange rate will remain stable in the inter-bank market.
A substantial improvement in the economy has boosted investors’ confidence.
