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SBP won't devalue, revalue exchange rate
KARACHI (May 10 2008): Governor State Bank of Pakistan, Dr Shamshad Akhtar has said that central bank will not devalue or revalue the exchange rate and the market alone will determine its real value. In interviews with various TV channels, she said that "SBP's job is to supervise the market and SBP is doing its job in a right way to stabilise the exchange rate, which is over fluctuated".

She also said that it is not "necessary" that the rupee attains its previous level of 60 against dollar. She said that the rupee had been stable over the last four to five years and was between 59 and 61 to dollar, however some shocks including imposition of emergency and political noise have caused negative pressures on the exchange rate.

The increasing macro imbalances such as rising imports and declining exports have also disturbed the exchange rate, giving an opportunity to speculators to take advantage of the situation, Akhtar added.

She said the SBP is taking measures to stabiles the over fluctuating exchange rate. But, she added SBP does not have any reversal policy and will not impose any restriction on the exchange rate. She said that SBP policy is not to devalue the exchange rate, therefore the central bank wants that market fundamentals should determine the real exchange rate.

"When we check the market it reveals that exchange companies are involve in irregularities and transferring huge foreign exchange abroad, therefore central bank stopped the export of pound sterling, euro and UAE dirham through exchange companies, Governor said. However, she made it clear that it is not a ban or reversal of any policy and said that it was SBP's prerogative to allow or disallow export.

In addition, the exchange rate on the interbank market is also over depreciate. Therefore, she added bank have been asked to correct negative sentiment in the market. "We are in a floating exchange rate regime, not in a fixed exchange rate regime. Therefore the market should determine the exchange rate," she said.

She made it clear that central bank will not tolerate any irregularity regarding exchange rate, but will continue to supervise the market. She said that exchange companies were found involved in speculation, therefore some restrictions have been imposed on them. She blamed exporters for delaying inward export receipts, while importers are covering their needs ahead of time.

She said that SBP have all reports of inflows and outflows and added that it is not a crisis situation that the central bank is facing for the first time in the history of the country. "Some 200 million-dollar inflows of earthquake victims have been received and we are expecting huge inflows from Asian Development Bank, World Bank and other resources, which would help improve the exchange rate," she said.

Copyright Business Recorder, 2008