Traders and business owners in Pakistan are warning of a Sri Lanka-like crisis

Traders and businesses warned of a Sri Lanka-style crisis on Wednesday, urging the central bank to perform its regulatory role in limiting rupee depreciation and dollar hoarding to reduce speculation.

According to Irfan Iqbal Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), credit letters are being opened at rates greater than the intra-bank rate of the US dollar.

Sheikh urged the State Bank of Pakistan (SBP) to use its regulatory tools to reduce currency speculation, uncertainty, dollar hoarding, fraud, and misinformation.

“Freefalling rupee has reached a point where it has become a threat to the national security as letters of credit for petroleum imports are being opened at a much higher rate than that of intra-bank rate; and a grave law and order situation might emerge in case of any fuel shortages for transportation and electricity generation.”

He added that he was forewarning all the authorities that “we are not far from a Sri Lanka-like scenario and radical decisions are needed to reverse the situation”.

The trade imbalance for fiscal year 2021-22 was a record $48.66 billion, or to more than $4 billion per month on average, up from $30.96 billion in the previous year, ie 2020-21, representing a 57 percent rise.

The FPCCI chief has asked the government to announce the expected inflows of dollars from all sources, including the IMF, World Bank, Asian Development Bank, IDB, and other multilateral and bilateral grants, loans, and financing facilities, in order to reduce market uncertainty, chaos, and rumor-mongering.