KARACHI: The rupee has been appreciating against all major international currencies, except the dollar, making it harder for exporters to keep their products globally competitive.

The Monetary Policy Information Compendium for January issued by the State Bank of Pakistan (SBP) reveals that the Pakistani currency appreciated against global currencies during the first seven months (July-Jan) of the current fiscal year.

According to the report, the rupee appreciated 3.63 per cent against the euro during the period under review. The European currency matters significantly for Pakistan because exports to the European Union have a sizeable volume.

Pakistan’s exports have been declining for the last three years as exporters claim the high cost of production has rendered their products uncompetitive.

China and India have emerged as the biggest competitor of Pakistan in the international market. Both countries are taking advantage of the economies of scale and producing cheaper products.

The rupee also appreciated 7pc against the pound in the seven-month period. It is reflected in the decline in exports to $784m in the first half of 2016-17 compared to $822 a year ago. Pakistan’s exports to the United Kingdom in 2015-16 were $1.628 billion. Exports to entire Europe in 2015-16 were $7.073bn.

The local currency also appreciated 10.5pc against the yen during the period under review as opposed to a deprecation of 5.5pc in the same period of the last fiscal year. The appreciation affected Pakistan’s exports to Japan, which are already in favour of the latter. Pakistani exports fell to $84m from $91m a year ago.

Exporters have been demanding the rupee’s devaluation against the dollar to boost exports. However, in the first seven months of 2016-17, the rupee depreciated only 0.02pc against 3.02pc in the same period of the last fiscal year. Although the rupee depreciated 2.24pc in the open market (against 3.6pc a year ago) during July-Jan, the SBP strictly monitored the dollar rate and did not allow it to cross Rs105.

Exports to the United States also dropped to $1.804bn during July-Jan 2016-17 compared to $1.923bn in the same period last year. The United States is an important destination for Pakistani exports as their value stood at $3.715bn in 2015-16.

Pakistan’s exports have been declining every year for the last many years. They fell to $21.97bn in 2015-16 after amounting to $24bn in 2014-15 and $25bn in 2013-14.

The government recently announced a relief package of Rs180bn to boost exports, but its impact will be visible in the second half of the current fiscal year.

Published in Dawn January 31st, 2017