Pakistan currency may slip to Rs 200 against US dollar amid rising inflation

The rising inflation and the passage of a mini-budget worth Rs 360 million in Pakistan might push Pakistan currency PKR to fall Rs 200 against the US dollar. As per the reports of ANI, the National Assembly passed the Finance Bill, also known as the mini-budget, and the State Bank of Pakistan (SPB) Bill 2021, despite significant opposition from the opposition benches.

The finance bill and the SBP bill, both filed in the National Assembly on December 30, were previously required to ensure that Pakistan's sixth review of the USD 6 billion Extended Fund Facility was approved by the International Monetary Fund's (IMF) executive board.

The withholding tax was first imposed in 2014

The withholding tax was first imposed in 2014, then withdrawn in 2016, and now, after being re-imposed, there is already talk of the Federal Board of Revenue (FBR) cancelling it because dealers have made it clear to the Bureau that they will not accept it and will simply pass the burden down the pipeline, according to Daily Times.

Exchange companies are complaining that the sudden re-imposition of a 16% withholding tax on them, as well as subsequent notices worth hundreds of millions of rupees sent to them, may well push the dollar to around Rs 200. The Exchange Companies Association of Pakistan has already complained to the press that the grey market has grabbed a large portion of their business, fearing that the withholding tax will cause the black market to completely supplant the legitimate business of exchange companies, according to Daily Times. The central bank controls the money markets.

The economy of Pakistan is on life support

Such actions could affect everyone at a time when the government is under fire for failing to preserve the rupee. The opposition parties suggest that the economy of Pakistan is on life support, and inflation is at a 22-month high. The opposition also stated that any administration that heeds the screams of the people protesting in the streets would have put this mini-budget to rest long ago, according to ANI. In Pakistan, inflation soared to a whopping 12-30% in December of last year, up from 11.50% in November of 2021.

(Inputs from ANI)

Image: AP