‘Managed’ exchange rate hurts exports, investments

Exporters in Pakistan are expressing strong disapproval of the country's managed exchange rate policy, arguing it actively harms export competitiveness and discourages foreign investment, particularly in manufacturing sectors geared for export.

For the past year and a half, the rupee has been gradually appreciating against the US dollar, a trend that exporters say is detrimental to economic growth. They point to a significant increase in imports, which widened the trade deficit to $39 billion in the fiscal year 2026, despite substantial remittance inflows of $41.5 billion. This contrasts with regional currencies like those of India and Bangladesh, which have depreciated against the dollar.

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Exporters have been losing markets due to the high cost of production, which is 12pc higher than in China, meaning we cannot compete in the international market.

"Exporters have been losing markets due to the high cost of production, which is 12pc higher than in China, meaning we cannot compete in the international market," stated Javed Bilwani, an exporter and former president of the Karachi Chamber of Commerce and Industry. He argued that instead of artificial currency appreciation, a gradual depreciation is necessary to make Pakistani goods competitive on the global stage.

While the government and the State Bank of Pakistan maintain that a stronger rupee contributes to economic stability, the business community, particularly exporters, views this policy as a significant hurdle. They believe the cheaper dollar inadvertently encourages unnecessary imports, further exacerbating the trade gap and undermining the export sector's potential.

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The solution to this problem is different. Instead of opting for artificial currency appreciation, there should be gradual depreciation to make Pakistani goods competitive.