Federation of Pakistan Chambers of Commerce and Industry concerned over de facto dollarization of economy terming it against national interests
Islamabad, September 18, 2013 (PPI-OT): The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Wednesday expressed grave concern over rapid and de facto dollarization of the economy terming it against the national interests.
It asked the government and the central bank to take concrete steps to de-dollarise the limping economy before it leaves rupee totally weightless and the whole matter slips out of the hands of the economic managers.
Increasing tendency among masses to use foreign currency in parallel to domestic currency is very dangerous which cannot be countered by statements or administrative measures, said Zubair Ahmed Malik, President FPCCI while speaking to business community.
He said that commercial banks now hold more US dollars than the central bank that indicates dollarisation of economy which is result of lack of trust on local unit.
The continued fall in rupee value and lack of reforms on the part of the government can result in widespread rejection of the rupee in the long run, he warned.
Malik Zubair Ahmed said that one of the reasons for quick dollarisation is negative rate of return given to the depositors on their savings by the commercial banks which leave many with no option but to prefer dollars to reduce risk associated with inflation and devaluation etc.
This is where the SBP could have played an important role which was missed in the recent monetary policy statement, he lamented.
However, the FPCCI chief said, the key lies with the government which should do something urgently to stop unofficial dollarization due to bad track record of the local currency and loss of credibility of political and monetary institutions.
Government can’t limit dollarisation by issuing orders, its can only be controlled by applying economic measures and encouraging use of local currency.
The government must ensure better regulations, enabling and transparent policies, mobilise resources, keep inflation, deficit and balance of payments in control and limit borrowing to boost forex reserves.
Moreover, there must be no loophole that allows speculators to make a profit from keeping dollars while masses and companies should know that they will gain insufficient or no profit from keeping dollars.
Official dollarisation has remained limited to some small countries but analysis of situation suggest that some bigger countries may find no other option but to embrace US dollar which would end their monetary sovereignty, hurt economy and leave central banks almost useless, said Malik.
For more information, contact:
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
B-1, Federation House, Main Clifton Road,
Tel: 0092-21-35873691, 93-94
Fax: +9221 3587 4332