Pakistani exporters look to benefit as ‘currency war’ gains traction

KARACHI: 

As the rupee loses its value against major currencies, Pakistani exporters are trying to cash in on the opportunity.

Given rupee’s fall against the US dollar as well as the pound and Euro, exporters stand to benefit as a cheaper currency makes their products less expensive, helping them gain competitiveness. While the Pakistani currency shed over 5% versus the dollar, its fall against the euro and pound was much heavier given the greenback’s weakness in the international market.

The rupee has depreciated more than 6.5% against the euro in the last one month compared to just 2% against the US dollar. Against the pound, the rupee has lost over 10% in the last two months.

Rupee has weakened against all major currencies

“We will definitely benefit with the sharp appreciation of the euro against the rupee,” Multinational Export Bureau CEO Babar Khan told The Express Tribune.

However, not all exporters have deals in euro.

Fawad Anwar, managing director of Al Karam Textile Mills – one of the country’s leading composite units, said that they had stopped finalising business deals in euro due to its sharp fluctuations in recent years.

“Most of the business deals in recent years have been finalised in dollars mainly because of its stability,” he added.

He, however, said that the rupee devaluation against the dollar is a positive for all Pakistani textile exporters.

The PML-N government has remained a staunch supporter of a stronger rupee. However, after keeping the rupee artificially stronger for over four years, it finally allowed the rupee to lose its value last month. The rupee lost over 5% against the dollar in the second week of December 2017.

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According to the Pakistan Bureau of Statistics (PBS), Pakistan’s textile exports in July-December 2017 touched $6.64 billion, up 8% compared with $6.15 billion in the same period of the previous year. With the help of government’s incentives and low base effect, textile exports are expected to rebound in coming months. One major incentive for textile exporters will be a weaker rupee.

Currency war

Since US President Donald Trump took charge more than a year ago, the US dollar is fast losing its value against major currencies. In the last one year, the dollar has lost over 16% and 14% against the euro and British pound, respectively.

The trade war debate got further credence last week when top officials of the Trump administration at Davos, Switzerland, strongly supported the case of a weaker dollar to support the US exports.

Khan, who runs two textile factories in Karachi that export most of their knitwear to the EU and the US, said that the threat of a ‘currency war’ between major economic powers will hurt global exporters.

“Currency war is not good for any economy, including Pakistan,” said Khan, “In response to the US move of weakening the dollar, other countries will also do the same and this will hit every other economy.”

Prioritising trade: Enhancing the country’s export competitiveness

But some believe the US administration will not be able to weaken the dollar after a certain limit.

“It’s easier said than done. I do not think Trump administration can go further with a weaker dollar,” said Anwar.

The stock markets in the US have been performing well and the Trump administration may have to increase the interest rates soon after which the dollar will gain value anyway, he added.

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Source: https://tribune.com.pk/story/1621419/2-pakistani-exporters-look-benefit-currency-war-gains-traction/

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