Where the rupee is going? : •Stocks have slumped •commodity markets are unattractive
By Sabihuddin Ghausi and the team of Business Reporters
KARACHI, Oct 5: Bankers, businessmen, stock brokers, financial analysts are still locked in an endless discourse to know ‘why’ and ‘who’ of the unusual phenomenon of dollars flowing in Pakistan from abroad witnessed during post September 11 period. And then there is the final question “where has the money gone?” It remains unanswered.
For more than last three decades, when there were democratic, quasi democratic governments and military dictatorships in Pakistan, the flight of capital has remained a permanent feature. For some unexplained reasons money started flowing in Pakistan last month.
Stocks are down, gold glittered for a while but is pale again, a total slump prevails over real estate business and then dollar started downward slide. Commodity trade in market does not show any unusual trend. The question is then: “Where is the money going?”
“September 11 is now a landmark in study of finance, banking, insurance and economics,” a senior executive of an insurance company remarked when asked to interpret the phenomenal fall of dollar value against Pakistan rupee late last week and early this week.
Dollar fell by Rs4.55 in the inter-bank and Rs1.55 in the kerb in first two days of this week almost bridging the dollar value in inter-bank and kerb.
Moral judgement and political fall-out of September 11 event apart, the insurance operator is fully convinced that the collapse of twin towers of World Trade Centre at New York and an attack on Pentagon in Washington has shattered the myth of US political and financial super power status.
“Dollar will never be again what it was on September 10, 2001,” is the final verdict of the insurance company executive who pointed out the international downslide of dollar after September 11 and a “coalition effort of USA and Western Europe” in the subsequent period to keep greenback afloat will never give it the status that it enjoyed hitherto.
“This answers the ‘why’ of your question,” he said and went on to point out ‘who’ are the people pumping dollars in Pakistan. The insurance operator is fully convinced that all those businessmen who parked in Dubai banks, their earnings through under-invoicing in exports and over-invoicing in imports and corrupt officials and contractors have started bringing back their money.
“Textile products have been fetching 5 billion dollars to 6 billion dollars a year during last five years,” a banker explained stating that a total of 25 billion dollars have been earned by the textile exporters in last five years. Translate this money into rupees at an average exchange value of Rs50 a dollar. Total comes to Rs1.2 trillion. “Hardly Rs350 billion have been reinvested” and a substantial chunk of money has been taken outside Pakistan.
This senior executive in a nationalised bank also endorsed this explanation that Pakistani businessmen, who had put their money abroad have brought a part of their deposits into Pakistan. “But why?” is the logical question.
“Read carefully the Security Council of United Nation’s resolution on combating terrorism,” the banker advised. He said hundi, hawala and money laundering have been identified as channels through which terrorism is fed. “We will starve terrorists of funds,” a fuming US President George Bush declared in one of his many utterances.
According to this banker’s perception the fear of being tracked down and reports of close monitoring of bank account transactions has forced many to liquidate their foreign deposits and bring money in Pakistan.
“Don’t forget hundi and hawala are the main tools to finance smuggling, drug trade and gun running in Pakistan,” the banker said. “So the reversal in flight of capital is very logical,” he believes. But then he is at a loss to explain where the money has gone.
“Exporters got panicky late last month and started pumping dollars in the inter bank trade,” a central banker explained the phenomenon that eroded dollars value. But the central bank cannot allow dollar to fall down below a certain limit. It would have given a crippling blow to exports and fuelled imports and hence the intervention of the central bank to stop the rut.
“Go to Peshawar and Quetta” a prominent business leader advised this correspondent to find out the lost money. These two cities are close to a theatre where the first big show of 21st century is being staged. “It cost money and much more to stage such a show,” he said.
KARACHI, Oct 5: Bankers, businessmen, stock brokers, financial analysts are still locked in an endless discourse to know ‘why’ and ‘who’ of the unusual phenomenon of dollars flowing in Pakistan from abroad witnessed during post September 11 period. And then there is the final question “where has the money gone?” It remains unanswered.
