Dar is a supporter of intervention in the currency market. – Pakistanwap

In his first media interaction after being sworn in as the finance minister, Dar said that the exchange rate cannot be left to speculators, sending a strong message to the public and banks that the local currency is a safe bet. Playing with value. personal interests.

“Interference [in the foreign exchange market] Not bad for the sake of the country but obviously the approach should be realistic.

He added that all central banks around the world, including the US and UK, intervene in the exchange market only when the value of their currencies goes above or below a certain band.

Dar has a biased view of rupee-dollar parity and believes in keeping the rupee strong against the US currency. The Pakistani rupee continued its upward momentum for the fourth straight working day, touching a fresh two-week high of Rs 1.79 against the US dollar at Rs 232.12 on Wednesday.

However, the new finance minister made it clear that he was not against a “market-based exchange rate regime”, insisting that it was the ruling Pakistan Muslim League-Nawaz (PML-N) that introduced a market-based exchange rate regime in 1998. What was the exchange rate implementation?

Pakistan does not have the luxury of dumping dollars into the market due to low reserves levels of $8.6 billion, so the DAR is expected to improve the currency’s value through administrative measures and containing imports.

Maintaining a real market-based exchange rate system is one of the four pillars of the IMF program. The IMF has urged Pakistan to adopt this liberalized system after $24 billion was injected into the market from 2012 to 2019.

According to The Express Tribune in January 2020, the State Bank of Pakistan (SBP) injected a total of $24 billion in the interbank market from 2012 to 2019. The time when Pakistan was not included in any program of IMF.

Official records also showed that from July 2012 to July 2013, the central bank injected $3.43 billion into the interbank market. The largest cash injection was from October 2016 to June 2019 – a period when there was no IMF program in Pakistan.

During this period, State Bank injected $20.7 billion into the interbank market. The highest amount the State Bank used to defend the rupee in any quarter was the $2.2 billion it infused between May and June 2018, followed by $1.8 billion from January to March 2018. This was the period when Ishaq Dar was not the Finance Minister.

From October 2018 to April 2019, when the PTI was in government, the State Bank injected around $4.5 billion in the interbank market. The Express Tribune had reported in September last year that the State Bank had re-injected $1.2 billion into the market from May to September 2021.

Asked about the policy of injecting dollars into the market to keep rates low, Dar said it was a big lie. We did not have dollars for vaccinations, he said, adding that the PML-N government created foreign reserves of $23 billion. He added that this is “natural growth and development” and a result of the policies of PML-N supremo Nawaz Sharif.

He said that I believe in market based economy but no one will be allowed to play games with Pakistan’s currency.

To another question about the full autonomy given to the State Bank by the previous government under the IMF deal, Dar said the SBP Act had some unreasonable provisions, “which in due course will be amended”.

During his first visit to the US, the IMF had stopped former Finance Minister Miftah Ismail from making any changes in the State Bank Act. All the political parties have serious reservations about some of the amendments made in the State Bank Act under the pressure of the State Bank.

The Monetary and Fiscal Policies Coordination Board (MFPCB), which the Muslim League (N) and the PPP wanted to retain, has been abolished. These political parties were also against a total ban on government borrowing from the State Bank, fearing that it would throw the federal government at the mercy of commercial banks.

Over the past eight months, their fears have been proven right.

Parliamentary oversight of the central bank has been further weakened through amendments to the State Bank Act. The government also wants to make an institutional arrangement instead of coordinating between the finance minister and the governor of the State Bank.
Muslim League (N) MNA Ali Pervez Malik said that under the law, the SBP board and its chairman, who is also the governor, are against best practices. The PML-N also objected to giving the governor the power to appoint deputy governors.

The opposition also proposed an amendment to the bill to limit the powers of the board to fix the salaries of governors and deputy governors and said that the public sector cannot have the same salary as the private sector.

Talking about rising inflation in the country, Ishaq Dar said that a strong rupee will help in controlling inflation. You all know what stage the economy was at when the PML-N left the government. The new finance minister said food inflation was at 2 percent, reserves were at their highest level, rupee was stable at Rs 104.50 and Pakistan’s growth rate was 6.3 percent.

Dar accused the PTI government of failing to manage the economy. He added that the PDM government could not reverse the destruction of nearly four years of PTI rule in a few months.