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New Wave of Inflation surging as Rupee Devalues

KARACHI: The trade and industry leaders warned of a new wave of price hike, following an unprecedented rupee depreciation. The rupee depreciated to more than 10pc in a single day yesterday.

They also cautioned about the expensive loans after the interest rate hike would hit industrial activities. Besides, they said, the weaker rupee would increase the landed cost of imported goods and industrial raw materials.

Earlier this week, the State Bank of Pakistan had raised the interest rate to 17pc. It is a 25-year high rate and is aimed at taming the inflation. But the latest currency devaluation would limit the impact of the SBP’s efforts to check food prices. The life of inflation-hit common people is feared to become even more miserable.

While costly borrowings after the interest rate hike will be hard on running the industries, its a step which should have been taken months ago by the former finance minister Miftah Ismail.

The expected Benefits

The decision to narrow the interbank and open market dollar spread must have been taken four months ago. Although high interest rate means lay-offs and closure of industries, the move to remove the cap on exchange rate regarded as the last option is widely appreciated.

With the dollar cap removed the issue of foreign remittances may improve. Besides, the inflows from multilateral lending agencies including IMF also result. It may also improve foreign direct investment in case the trust of investors is restored.

A difference of Rs 4-5 in the interbank and open market looks feasible as compared to Rs 34-35 which had encouraged black marketing of dollars in the market. “Now hopefully this will end,” he added.

Wholesale Grocery Rates

Karachi Wholesalers Grocers Association Chairman Rauf Ibrahim claimed that the wholesale pulses rates surged by 15pc on Thursday due to 10pc decline in rupee value. “People earning mediocre salaries will face difficulties in managing food expenditures as the price of all other imported foodstuff and locally made items will surge,” he said.

Petrol Prices

Faraz-ur-Rahman, Korangi Association of Trade and Industry (Kati) President feared the petrol prices may reach Rs300 in near future.

Zahra Sikandar
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