KARACHI, July 20: The over valued rupee is not only creating havoc for the household budgets but has also swelled country’s internal and external debt to Rs4,003 billion (Rs1,708 billion and Rs2,224 billion respectively).

As of today it is being strongly felt by experts that the real value of the rupee should be around Rs50 to a dollar which means a cut of around Rs10 from its present level of about Rs60.

If the rupee is placed at its real value country’s import bill may remain at its level in dollar term but will definitely come down in rupee term. As a result cost of imported industrial raw materials, capital goods as well as POL prices, which are three major import items, will come down.

On an average the country annually imports POL products worth $3 billion, while import of capital goods last fiscal (2001-02) stood at $2.189 billion, agriculture, chemicals and textile raw materials at $2.044 billion.

In other words it means that over 70 per cent of our import bill comprises these groups because last fiscal (2001-02) out of total imports of $10.335 billion over $7 billion were spent on import of POL products, capital goods and industrial raw materials.

Once the government brings the rupee to its real value there will be chain effect of low cost on each and every economic activity which would ultimately benefit equally to all including industry and family budgets.

It is true that we do not have control over world crude oil prices but one thing is for sure that the government does have a control over currency parity which could be adjusted any time according to economic requirements.

Let alone the positive impact of cheaper industrial raw materials and capital goods, only if POL products are made available at lesser price they will have a snow ball effect on the entire economy where prices of all manufactured goods will come down.

Higher POL prices results in higher energy charges by utility companies who consume huge quantity of imported furnace oil to run their generating units. This results in higher input cost of industrial sector as well as domestic consumers. It had been also resulting in high cost of transportation and freight rates.

For the last so many years family budgets had been in total disarray because of high cost of manufactured goods and utility bills and once the government checks this issue by bringing the rupee at its real value a common man will have a sigh of relief.

Another factor which is crippling the household budget of lower and middle class for the last so many years is a stagnation in their income, it may be of self employed person or of those getting remuneration.

Beside this the annual inflation which is being calculated by private sector at 8 per cent per annum is also adding to the woes of middle and lower middle class who on every coming day find it even more difficult to meet their both ends.

If the government takes a bold decision of placing the rupee at its real value the export trade will come under pressure but it will prove a blessing in disguise because this will encourage or compel exporters to go for higher quality value addition of textile goods which constitute 65 per cent of our exports.

Presently Pakistan is among the lowest earner in dollar value from one kilogram of cotton which stands at $8 only, while world average stands at $15 to $20 which also earned by countries like Bangladesh, India and Sri Lanka.

Our exporters have the habit of demanding concessions and protection but they have yet to learn to survive in free-market economy which ultimately they will have to face by year 2005, when textile quotas are lifted.

For offsetting the impact of stronger rupee the only way out for our exporters is to go for higher value addition because many countries who import goods from Pakistan sell the same at higher value and earn huge foreign exchange.

Countries like Japan and EU member states import grey cloth yarn and rice from Pakistan and after processing these goods they earn 10 times higher in value.

Chairman Pakistan Commodity Traders Association (PCTA) Raees Ashraf Tar Muhammad told Dawn that prices of all farm produces such as spices, dry fruits, edible oil, wheat, rice etc., remained lower between 40 to 60 per cent since 1997. — Parvaiz Ishfaq Rana