Adviser to PM on Finance and Revenue Shaukat Tarin once again warned speculators that Pakistan's rupee would reverse its downward course amid measures taken by the government.

Talking to media persons in Karachi on Friday, Tarin said that as per the Real Effective Exchange Rate (REER), the Pakistani rupee should be between 165-167, however, it remains undervalued due to "speculation".

Pakistan's rupee registers minor gain against US dollar

He also refuted demonetisation rumours, stressing that the government will not take any steps that affects businesses' confidence or create distortion in the market.

“Rumours regarding demonetisation are also making the rounds to create panic among people, but I would like to clarify that no such measure will be taken which would affect the confidence,” said Tarin.

“I would like to (also) warn the speculators that the PKR would reverse its direction, which would not bode well for the speculators.”

The rupee has been under pressure for months now with the staff-level agreement between Pakistani authorities and the International Monetary Fund (IMF) providing some sense of direction at the start of this week. However, the rupee's slide continued after two days of increase.

On Friday, reports suggested that the rupee hit an intra-day low of over 176.5 as decrease in foreign exchange reserves took toll on the currency.

SBP-held forex reserves decrease $691 million due to external debt repayment

Earlier, addressing Pakistan’s first GEM Board listing, Tarin said that lack of accurate credible information on SMEs discourages financial institutions from lending to SMEs at favourable rates.

“To facilitate capital availability to SMEs, Pakistan Stock Exchange (PSX) introduced this Growth Enterprise Market (GEM) Board for such companies to list and raise capital that is low cost and does not require debt servicing, which is a burden on companies.

"GEM Board facilitates such companies which would otherwise have to obtain debt financing from banks and other financial institutions."

Tarin to launch new brokers’ regime

He said that through the GEM Board accredited investors can invest in growth companies opting to raise capital by listing on the GEM board of PSX. “This shall help accredited investors in diversifying their investment portfolios and benefit from the growth potential of such companies.”

Tarin invited SMEs especially from the exporting sector to avail this opportunity to raise capital through the stock exchange.

Speaking on the housing sector, the advisor said that the housing sector benefits around 40 industries and creates a lot of employment.

“But we have to make sure that those benefits are aligned with other productive sectors of the economy and the capital is not diverted entirely to the real estate sector.”

He said that people are just investing in land, “they buy plots and they just lie there for years that is productive capital sunk into dead assets”.

“We will come up with some kind of taxes, which will be applied on those dead assets so that the money can recycle to other sectors of the local economy,” said the advisor.

Mentioning State-Owned Enterprises (SOEs), Tarin said that the circular debt phenomenon has choked some of the public sector companies. “We are in the process of unlocking that,” he said.

The ex-banker informed that the government is encouraging Real Estate Investment Trust (REITs) and expects the launch of several REITs in the coming days.

“We will be using REITs as a mechanism to unlock the real estate potential of assets in the public sector and those REITs will be listed, and I think by their listing the capitalisation of the stock exchange would go up as well,” said the advisor.

This article was first published in Business Recorder on Nov 26, 2021.