The IMF’s demand for further rupee devaluation could make fuel more expensive, add to inflation and create pressure on the State Bank of Pakistan to raise interest rates, former Economic Adviser to the Finance Ministry Dr. Ashfaque Hassan Khan has warned.

Speaking to a private news channel, Ashfaque said the rupee could be around Rs. 235 per US dollar if the State Bank were not intervening in the foreign exchange market.

He said the market currently has an excess supply of dollars and argued that the rupee would strengthen if the central bank stopped buying dollars. In his view, this intervention is keeping the currency near Rs. 277-278 per dollar.

Ashfaque estimated that currency depreciation and high interest rates had together cost Pakistan around $148 billion over a five-year period.

He opposed any additional rupee devaluation at the IMF’s insistence, warning that a weaker currency would immediately increase the rupee cost of imported oil. Higher fuel costs, he said, would feed into domestic prices, intensify inflation and could ultimately require the SBP to keep interest rates high or increase them further.

Ashfaque also challenged the idea that currency depreciation necessarily delivers stronger exports. Pakistan exported around $32 billion in 2018-19 when the rupee was much stronger. The currency subsequently fell from around Rs. 180 to as much as Rs. 307 per dollar, but exports did not show a comparable increase.

He instead recommended targeted import compression, particularly for luxury vehicles and other costly imports, until Pakistan’s balance of payments position improves.