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Rupee’s decline


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SEVERAL internal and external factors have brought the rupee under pressure in recent days. It is not for the first time that the value of the rupee has been subject to sudden fluctuations. Each time foreign debt payments approach, Pakistani currency loses some of its value. In the first 10 months of the current fiscal to April, the rupee lost around eight per cent against the greenback. When the market gets shaky, the rupee touches new lows before stabilising for a short time. This time the approaching commodity and Haj payments put pressure on the market along with debt and other official payments. A shortage of dollars offered speculators a chance to make quick bucks. The concerns over debt payments, however, evaporated as soon as the State Bank of Pakistan announced the receipt of a multilateral loan of $200m, reducing exchange-rate volatility. Additionally, the weakening euro has strengthened the greenback. Investors worldwide are buying dollars, which are being seen as the safest haven in the current global economic conditions. The Indian rupee too has been affected. But it will regain lost ground sooner than later on the back of the economy’s strength.

Pakistan’s story is different. Its outflows of over $4bn in the current fiscal surpass inflows of $1.2bn, including foreign investment of over $600m. Foreign exchange reserves are depleting, though slowly, because of drying foreign investment and official bilateral and multilateral capital flows. The fortunes of the rupee will continue to fluctuate until the economy shows signs of stabilisation and foreign capital flows start coming in to boost foreign currency reserves. Moreover, the government will have to take measures like providing uninterrupted electricity and gas to the export-oriented industry to boost exports, curtail unnecessary imports and move ahead with plans to auction 3G telecom licences to send a positive signal to the currency market.

Comments (13) Closed

shazada zahid May 28, 2012 05:27am
The PPP or PML will not be able to take Pakistan out of Economic difficulties - they are too corrupt and lack the experiences in economic management or development. The Pakistanis are surviving on the expatriate remittances and once they dry up the economy will collapse and there will be social upheavel. Pakistan need honest and experience political set up and not the recycled political faces.
JTS May 28, 2012 07:09am
asking the current crop...PPP, PMLN, ANP, MQM, JI etc to fix this economy is like asking a bus driver to pilot a 747.....
Aneyeopener May 28, 2012 07:58am
If anyone glances over the achievements and progresses of Pakistan Economy during Military Rules will find out that it is always better than the results achieved under so-called democratic governments. The simple reason is that Military will remain in Pakistan and the looted-corrupt democratic government individuals wish to leave abroad. Example is candid that almost all government leaders keep 2 nationalities and have houses abroad. Their off-spings do also live abroad at the cost of poor pakistanis. Let the revolution emerge into Pakistan. Imagine that nobody likes PPP in Pakistan, yet the corrupt leaders insist that they are the elected leaders of the janta. Allah ne namrood, karoon aur phyroan ko mohlaat di phir unko tabah-wa-barbaad kar diya. Inshallah hamarey corrupt leaders ko Allah ta'ala zaroor saja daaiga.. aameen.
Ebrahim May 28, 2012 08:06am small contribution that expatriates can make is to send more of their local currency ($, Euros, etc) to Pakistan. While it gives them a good exchange rate, it also helps the country to stem the rupee slide.
BRR May 28, 2012 08:11am
How would anyone, including IK, make a difference, without new policy initiatives, multi-lateral arrangements, etc. It is not about PPP, PML or IK, it is about being able to pay bills and living within the means available. Getting into a nuclear race with India, or funding militants to instigate trouble in Kabul is an expensive proposition. If you want to sit at the poker table, you better have a stack of cash, and you better quit when you run out of money before you get shot.
khurram May 28, 2012 10:23am
Had there be no foreign remittances we would have had become Zimbabwe.. All we need is sincere Govt and cheap electricity(hydro ). And more barter trade kinda aggrements just like we did with turkey will help alot! .. We are full of potential for God sake!
raika45 May 28, 2012 12:15pm
What your country needs is billions, not a few hundred million.Also most of them settled down overseas with a family have to think of their future.You either lure foreign investment or boost your exports.Since your rich are not keen on paying income tax.Luring foreign investment is iffy since you have no proper power supply nor control over the gun totting self proclaimed religious and secretarian fanatics.Man, can any Pakistani reading this come up with a solution to your countries problem instead of posting complaints.Who knows someone will come up with a gem of an idea.
Jay May 28, 2012 01:52pm
Refuse all aid, ban all imports except the necessary oil, gas & grains (occasionally). Live a lifestyle as much we can afford...for example ride a bike to work...or at the most a scooter...spend effort & whatever resources we have to build a world class rapid transit system..... Apni maddad ap kay usool apnao.... Phir dekh khuda kya karat hay.
M.FAAIZ Gilgity May 28, 2012 01:55pm
pakistan has two major economic problem.i)debt services..ii)budget deficit
Jay May 28, 2012 01:57pm
Aye tairay lahooti - us rizq say maut achi - Jis rizq say atee hay parwaz main kotahi.
Rana Amjad May 28, 2012 03:15pm
Get real guys! It's not PPP or PML but over spending has brought us to this situation. Military expenditures are beyond or means & have to be controlled.
Yemeen Zuberi May 28, 2012 05:05pm
Must not forget that many sincere economic experts fail, one of them is Shahid Kardar, to continue with the present government. No one can deny that these experts are of high caliber professionally. Even attorney general Anwar Mansur could not continue with the government. Or the government could not continue with these professionals. It is the expertise and brain that saves the country and its economy.
Muhammad Alvi May 28, 2012 10:09pm
I like your example. But you did not name some other political parties. Are they OK? I think, Imran is not in that crop. Try him next time, but you need some level headed voters also.