LAHORE - Imposition of new taxes on transfer or sale of property has forced the sector’s investors to divert their investments and they have now started to hoard the greenback, leading to increase in its value against rupee, which is presently trading at Rs106.30 versus one dollar in open market.

Experts believe the dollar will continue to rise in both inter-bank and open markets in the coming days until the issue of property taxes is not resolved. The exchange rate of dollar and rupee stands in the range of Rs105.8 against one dollar in interbank, currency market dealers said.

Financial experts said that during 2016, the rupee remained fairly stable compared to 1.2 percent and 0.4 percent depreciation of Indian and Sri Lankan rupee, respectively, against US dollar. Nigerian Naira has depreciated by 36.4 percent, when Central Bank of Nigeria abolished the peg and introduced flexible exchange rate regime. On the other hand, Bangladeshi Taka, Indonesian Rupee and Thai Baht appreciated by 0.3 percent, 5.1 percent and 3.2 percent, respectively.

Economic slowdown, depreciated European currencies and appreciated US Dollar and Japanese Yen could result in lower Pakistani exports to Europe and increased import bill; hence worsening Current Account (CA) balance and pressures on Pak rupee, limiting SBP to reduce interest rates.

Experts are expecting currency depreciation of up to 3-5 percent, saying incoming forex inflows, lower energy import bill and SBP effective management can resist major depreciation as feared by IMF and other institutions of up to 20 percent.

Importers have blamed that the government, in connivance with the central bank and forex dealers, have lifted the US dollar artificially just to facilitate exporters. Sardar Usman Ghani, an importer and FPCCI Standing Committee chairman, argued that dollar was traded at Rs98 two and half years back when reserves were just $8 billion and now more than three-fold increase could not control the greenback. Instead local currency is being depreciating on the demand of exporters, he blamed.

“The investment in property has now started flowing towards dollar, resulting in depreciation of rupee despite higher inflows of remittances during last two months,” Bilal Hussain, a currency dealer said. He said that the present situation is apparently in rupee’s favour as Pakistan has record foreign exchange reserves of over $23 billion while it received over $20 billion as workers’ remittances in 2015-16.

He said that margin in real estate is so high that property dealers operating in Dubai are constantly shifting their offices to Pakistan. And now they have diverted their investment to greenback.

According to economists, the drop of rupee continued despite record foreign exchange reserves, which mainly are the borrowed money from IMF, World Bank and other agencies. The foreign reserves, which have tripled from $8 billion to about $23 billion in two and a half years period, have not lifted the local currency value rather it is on declining trend against greenback.

Former finance minister Dr Salman Shah is of the view that foreign reserves alone cannot fix the local currency exchange rate with foreign currencies rather import-export gap and inflation rate are the major economic indicators to set the real value of rupee against dollar.

Forex Association of Pakistan president Malik Bostan said the imposition of withholding tax on non-filers’ bank transactions is also constantly supporting dollar buying against rupee that created the dollar demand. The greenback might go further up if the central bank did not interfere to keep the dollar at Rs106.

According to GCCI president Samee Ullah Ch, a currency’s international value over the long term depends on that country’s economic realities. And Pakistan’s economic realities haven’t changed much, he added. According to him, the widening trade deficit is evaporating the advantage of high foreign reserves, as the rupee is not appreciating against dollar.

FPCCI former president Mian Idrees urged the government to prepare a new policy in consultation with all stakeholders to effectively control the fast widening trade deficit and to increase exports. He said that it is a high time that the government should put curbs on unnecessary import of luxurious items. He said that a huge increase in the trade deficit would have dire consequences for the economy of Pakistan therefore all future trade policy initiatives should take a comprehensive view of this problem.

As per the recently released numbers by Pakistan Bureau of Statistics, Pakistan trade deficit increased by 10.7pc in FY16. Food products imports increased while machinery imports surged. Exports have declined by 12 percent, said professor Ashfaq Ali Khan, noted economist. He stated that rupee is week against dollar, as most of economic indicators reflected below par performance.