The dollar value may exceed Rs200 after the imposition of WHT

ISLAMABAD – The value of the US dollar is likely to exceed Rs200 in the country as the Federal Board of Revenue (FBR) recently issued notices to exchange companies to impose a withholding tax on them.

Economic experts remained cautious speculating on the value of the currency in the near future. However, they admitted that the local currency will remain under pressure in the coming months due to the widening current account deficit, the depletion of foreign exchange reserves and the outflow of dollars to Afghanistan. The massive increase in oil prices on the international market would further widen Pakistan’s trade deficit, putting further pressure on exchange rates. Meanwhile, Pakistan’s need for external financing is another threat to the economy. The dollar value recently reverted to Rs176 to Rs177, rising from the highest ever above Rs181.

The Association of Exchange Companies of Pakistan has warned that the dollar price could rise above Rs200 with the sudden imposition of a withholding tax on exchange companies. Malik Bostan, chairman of the Exchange Companies Association of Pakistan, said the FBR issued a notice of non-payment of the 16% withholding tax, which was withdrawn by the previous government in 2016. “The exchange companies will pass the 16% withholding tax on to the consumer and this will cause the dollar value to increase up to Rs20,” Malik Bostan said in an interview with The Nation on Friday.

The FBR, he said, assured to solve the problem. However, they did not issue any notification to suspend the 16% withholding tax demand notices, he added. He explained that the local currency is already under pressure due to the Afghanistan issue.

A senior economist, working with the government, told The Nation that no one can predict the dollar value in the market-based exchange rate system. “This is one of the sensitive issues of exchange rate speculation,” he said and admitted that the currency would remain under pressure due to the position of the external sector.

Renowned economist Dr Ashfaq Hasan Khan called for the adoption of an “aggressive but selective import policy” to control the country’s growing trade deficit. “How will you control the import bill when importing luxury vehicles, cellphones, foodstuffs and others?” He further said that the government had authorized a depreciation of the currency from Rs152 to Rs176 on the instructions of the International Monetary Fund (IMF). However, he said he would not speculate on the exchange rate as it is a sensitive issue.

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