Miftah: Pressure on rupee will “go away” soon

According to Miftah Ismail, pressure on rupees will vanish very soon.

In a one-on-one conversation with Mosharraf Zaidi, CEO of the consulting firm Tabadlab, Mr. Ismail said that the number of dollars coming into Pakistan will soon be more than the amount going out, which will keep the exchange rate stable.

“No one likes surgery, but sometimes it’s necessary,” he said to defend his policy of limiting imports to stop the flow of dollars out of the country. This may slow down economic growth and make it harder to collect taxes at the import stage.

He kept saying that worries about a sovereign default were exaggerated and that policymakers knew “all the balls that (they) have in the air,” meaning that they knew how much foreign currency they could expect to get in the next three months or so.

“This is what I’m trying to do: slow down our imports without slowing down our exports. I’m going to do that for two to three months. “With each week that goes by, I learn more about the foreign currency,” he said.

Last year, the country spent $80 billion on goods and services from other countries, but it only made $31 billion from its exports. Because of this, there is a shortage of dollars, which has put pressure on the value of the rupee, which has been going down against the dollar.

First, the government asked a friendly country that won’t be named for deposits in dollars to build up its foreign exchange reserves. But it turned down Islamabad’s request because, as the finance minister said, Islamabad never gave back the deposits.

After that, the friendly country said it was willing to buy shares in listed government-owned companies as part of a buyback agreement. This will give Islamabad the option, but not the obligation, to buy back the same shareholding after a certain amount of time at a 5% higher price.

“There’s not even a question of price discovery,” he said, adding that the friendly country “wants to help us” and is giving Pakistan “a good deal.”