ISLAMABAD: The Pakistan Economy Watch (PEW) on Wednesday said the continued decline in exchange rate has shattered the confidence of masses in the rupee which has triggered dollarization of the economy.
Dollarisation of the economy is against the national interests as it damages monetary sovereignty, hurt the economy and leave central bank almost useless, it said.
PEW President Murtaza Mughal said that the government and the central bank should take concrete steps to de-dollarize the economy before it leaves rupee weightless.
He said that dollar is sold at Rs117 in the open market, forex reserves with the central bank are below the level of twelve billion dollars while the trade deficit for the first eight months is 4.27 billion dollars over and above as compared to the last fiscal.
He added that frequent devaluation has pushed masses to convert their savings and profit into the dollar that cannot be countered through encouraging statements of secret meetings with the currency dealers.
The continued fall in the value of rupee and lack of reforms as well as inaction can result in widespread rejection of the rupee, in the long run, he warned.
Murtaza Mughal said that one of the reasons for dollarisation is the negative rate of return given to the depositors by the commercial banks which push them to prefer dollars to reduce the risk of inflation and devaluation.
The government can’t stop dollarisation by issuing orders, it can only be controlled by introducing long-awaited reforms and using positive economic measures like better regulations, enabling and transparent policies etc.—INP