Pakistani rupee devaluation raises fuel price hike fears

KARACHI: In backdrop of the falling value of Pakistani rupee against the US dollar in local market, prices of petroleum products are feared to increase in the coming days.

The economists while talking on the repercussions of Pakistani rupee’s falling value on the economy have feared a rise in the prices of petroleum products.

The Pakistani rupee fell for a third straight session on Tuesday after the central bank withdrew its support on Friday, effectively devaluing the local currency.

The rupee, which has mostly traded in a tight range of 104-105 per dollar since December 2015, has shed over 5 percent in the past three sessions.

Keeping in view the economic backlash, the analysts have called for arresting the devaluation of Pakistani currency to avert further financial burden.

All Pakistan CNG Association (APCNGA) central leader Ghyias Abdullah Paracha said that energy is the largest import item of Pakistan and volatility in the exchange rate will undoubtedly hike prices of oil and gas, which are already increasing in the international market.

He feared if the depreciation of rupee continued, the price of oil and gas would face a hike of 7-10 percent, putting the burden on industries and citizens.

Earlier, the State Bank of Pakistan’s (SBP) withdrawal of support for the rupee was widely seen as a devaluation measure since the central bank is the most influential player in the thinly traded local foreign exchange market and controls what is widely considered a managed float system.

“Presently the central bank is allowing the market to determine the rate, but it seems to be reversing the extreme volatility if any, during intraday trading,” Muzzammil Aslam, chief executive officer of EFG Hermes Pakistan, told Reuters.

The central bank said after market hours on Friday that a weaker rupee would help the economy grow and ease balance of payments pressures, comments that market participants interpreted as SBP’s approval of a weaker rupee.

“I see the rupee settling somewhere from 110 to 111, I think it would not be allowed to pass 112,” said Samiullah Tariq, director of research at brokerage firm Arif Habib.