Tax advisory and consultancy firm Tola Associates has said in an Economy Alert note released on Wednesday that the average rupee-dollar value would be 211.5 rupees instead of the current 277 rupees by the end of October this year if International Monetary Fund (IMF) conditions were excluded, The News reported.

 

However, the State Bank of Pakistan (SBP), responsible under the law for managing the exchange rate regime, has long been arguing that the current rupee-dollar parity is as per market conditions.

 

According to the advisory firm, Pakistani rupees have been traded at a higher value for the past three years, severely affecting the Pakistani economy.

 

As per the advisory firm, had the rupee been trading around its estimated three-year average of (Rs211 =1$), the average 8.7 per cent inflation for the July-October period could have turned into deflation of 4.67 per cent.

 

In September 2024, following a staff-level agreement between Pakistan and the IMF in July 2024, the executive board of the Fund approved Pakistan's long-awaited $7 billion loan programme that will last 37 months and help boost Pakistan's economic doldrums.

 

Inflation has fallen to 4.9 per cent as compared to 40 per cent in May 2023.

 

The advisory firm further estimates that a one per cent decline in interest rate would decrease domestic debt repayment by Rs475 billion in the current fiscal year.

 

Former chairman of the Reform and Revenue Mobilisation Commission Ashfaq Tola told The News on Wednesday that if there were no IMF conditions about the exchange rate, the rupee would not have been equivalent to Rs278 to a dollar in 2023-24, stressing that it would also have been much lower in the preceding year.

 

He said that following the IMF's condition, the rupee was trading around Rs238 to a dollar in September 2022, but within the first week of Ishaq Dar's tenure as Finance Minister, the dollar sank to Rs218 without any fundamental economic changes.

 

Stock exchange market experts criticised the central bank for claiming benefits from an undervalued rupee by purchasing dollars from the open market in the absence of major foreign debt-related inflows.

 

In the last fiscal year, the central bank bought over $6 billion from the market, which was only possible due to the undervalued rupee. In July alone, the central bank bought about $722 million from the local market, The News added.