LCCI chief proposes trade with china in local currencies to end reliance on US dollar

Lahore: Lahore Chamber of Commerce and Industry (LCCI) President Mian Nauman Kabir has said that trade in local currencies, particularly with China, will help Pakistan to end the burden of relying on the US dollar in bilateral trade and to bring down the trade deficit.

In a statement, he maintained that Pakistan’s mutual trade volume only with China was more than US $13 billion and if the country makes currency swap agreements with regional countries in general and with China in particular, it will significantly lift pressure off the foreign exchange reserves and dependency on the dollar will be decreased.

The LCCI chief reminded that historic devaluation in Pakistani rupee had been recorded against the USD during the ongoing financial year. He stressed that the trade deficit is one of the major reasons for rupee devaluation.

Kabir mentioned that the currency swap agreements with regional countries will help make Pakistani currency stronger as weak Pak-rupee against the USD has become a serious matter of concern for the economy.

He contended that Pakistani rupee devaluation had made the imports of raw materials and other necessities for the industrial sector more costly.

The LCCI President observed that a stable currency was crucial to achieve real economic growth. “Unfortunately, the Pakistani rupee is continuously falling against the dollar which has had negative impacts on the national economy,” he added.

Meanwhile, LCCI Senior Vice President Mian Rehman Aziz Chan and LCCI Vice President Haris Ateeq said in joint statement that: “When currency is losing its value and has a weaker outlook, not only foreign investors would stop coming in but the local investors would also hesitate to put in their capital in new ventures.”

They warned that currency devaluation always leads to lower industrial productivity as the imports go more expensive, rise in inflation, exporters have less incentives to cut production cost, reduce the purchasing power of the common man, rise in import bill and will pose serious challenges for the economy.

They opined that: “The State Bank of Pakistan should take stringent measures to curb the undesirable outflow of dollar by limiting foreign Currency carrying, directing exchange companies to ensure biometric verification for all foreign currency sales and trade in local currencies with bordering countries.”,

They added that exorbitant devaluation was taking place as the inter-bank dollar rate has plunged to Rs 192.52 as on May 13th 2022. This essentially means that a devaluation of around 6% has taken place in the last one month only.

They reminded that since “our Industry heavily relies on imports of raw materials, components and machinery, this devaluation has resulted in an increase in the cost of production. The new Government should take all possible measures to strengthen the local currency. There needs to be a renewed focus on import substitution and enhancing exports besides creating an environment of political stability. The imports of non-essential and luxury items should be curtailed.”