Drowning economy needs immediate attention

January 16, 2023 (MLN): In the wake of the economic slowdown where everyone’s concern is hovering around the country’s financial sustainability, the government needs to immediately overcome the mess and lower dependence on higher domestic borrowings.

First of all, the authorities should demonetize the currency note worth Rs5000 with immediate effect with one-week time surrender or deposit, a seasoned banker suggested while speaking to MG Link News.

In addition, all the activities of the exchange companies should be halted for six months and bound to submit available dollars to SBP at a fixed rate.

The government also utilizes the option of buying gold from locals at a premium while the Statutory Liquidity Ratio (SLR) on conventional banks and Islamic banks can be raised from 19% to 25% and 14% to 25%, respectively.

In order to lure more dollars into Pakistan, the government should immediately increase the profit rates on Naya Pakistan Certificates and introduce a three-tier exchange rate against PKR, export-import bills, and remittances.

Earlier, Zafar Paracha General Secretary of the Exchange Companies Association of Pakistan (ECAP) said the same pertaining to the three-tier exchange rate.

For instance, the government may offer PKR 240 per dollar to overseas Pakistani abroad and for receiving inward remittances. Resultantly, the volume of remittances will increase significantly and the grey market become less attractive.

Meanwhile, the government may quote PKR 228 per dollar for export proceeds while the rate for importers would be on weighted average rates of the home remittance (overseas Pakistanis) and for exporters, the rates should be PKR 234 per USD.

The said measure will motivate the exporter and overseas Pakistani/exchange companies including the home remittance business and de-motivate the elicitor business and import also throughout the non-channelize business, he added.

In the current situation where the economic conditions are abnormal and banks are reluctant to open the Letters of Credit (LC)s for which various LCs are either pending or in the pipeline, he highlighted.

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