High-level economic body declare rupee overvalued

The Economic Advisory Council (EAC) on Wednesday raised concerns over the pressure building upon the exchange rate that was also reflected in the central bank’s data, urging Prime Minister Shehbaz Sharif to look into the matter to keep exports competitive.

Officials noted that this indicated a 4% overvaluation of the rupee, but Deputy Prime Minister Ishaq Dar argued that the rupee was actually undervalued by 15%. The exchange rate has remained stable above Rs279 per dollar for the past few days.

EAC members, including exporters, expressed concerns that the rupee’s overvaluation was making their products uncompetitive. Finance Minister Muhammad Aurangzeb assured them that he would raise the issue with the State Bank of Pakistan (SBP).

Pakistan’s foreign exchange reserves have declined by $1 billion to $11 billion, despite support from the IMF. The SBP has been maintaining reserves by purchasing dollars from the market, with $9 billion bought last year. However, recent purchases slowed due to a $420 million current account deficit in January.

The SBP stated that import restrictions have been lifted, allowing duty-free imports of cotton, textile machinery, spare parts, and other raw materials not produced locally. The current account posted a $700 million surplus in the first seven months of the fiscal year, supported by $19.2 billion in exports.

Prime Minister Shehbaz Sharif emphasized improving local industries to boost exports and attract investment. He also highlighted the importance of regional trade, agriculture, IT development, and job creation as key government priorities. The EAC members expressed confidence in the government’s economic policies and suggested further steps to strengthen economic growth.