The sustained fall of the dollar, with minor interruptions, has been upsetting many countries of the world and their economic thinkers. In the last two years the US dollar has fallen against the Euro by 40 per cent , against 24 major currencies of the world by 34 per cent and 15 per cent against the Japanese yen.

When will this steady fall in the world's proverbially strongest currency, which serves as the reserve currency of most countries, come to an end? That is the question the world's economic leaders are asking without a satisfactory or reassuring answer from the US leaders who are running large budget deficits and larger balance of payments deficits in their current account.

Disappointed by the outcome of the September meeting of G7 finance ministers in Dubai in September with their joint statement calling for an end to the volatility of the exchange rates, they were hoping for an answer from Boca Raton, Florida, US where the G-7 finance ministers met last week.

But they again came up with a joint statement calling for an end to volatility of the currencies but without agreeing on any specific cures.

The main road-block is the American dualism in its election year. The repeatedly avowed US policy is for a strong dollar but in actual practice it is steadily pursuing policies and practices which will ensure a weak dollar that will promote its exports and reduce the excessive imports from countries like China and Japan.

But there are others, like the "Economist" of London which argues the dollar ought to go down by another 20 per cent over the next few years as after adjusting for inflation the dollar is still close to its 30-year average.

If that happens most of the countries of the world will come to grief - countries like China which has a foreign exchange reserve of $406 billion, Hong Kong with $118.4 billion, Taiwan with $206.6 billion, South Korea with $156.7 billion and India with $96.6 billion. East Asia has truly placed all their savings in the steadily falling dollar and have been losing money.

Instead of taking steps to strengthen the dollar, like increasing its interest rates or borrowing less from the rest of the world, the US urges Europe to come up with stronger economic reforms, and China to revalue its strong yuan or set it afloat in the currency market, and Japan to let its yen find its own level in the currency market without excess of intervention by Tokyo to buy the dollars and keep them high in the currency market.

But while the Euro region finds it hard to make fast economic reforms, China is not ready to revalue its yuan and Japan is not ready to let the yen float up and make Japanese exports more costly at a time of Japan's economic revival after over a decade of recession.

Hence the deadlock in an election year in the US when George Bush is not ready to initiate any unpopular measures in the economic sector when he has enough problems politically and in the foreign policy areas.

The US economy is in such a mess that instead of the budget surplus of 2.4 per cent of GDP it had in 2000 it has a deficit of $475 billion as well as a balance of payments deficit in the current account of $500 billion.

The budget deficit at 4.6 per cent of the GDP which President Bush promises to half in five years. But judging by the manner he is increasing his military and foreign policy spending it is hard to believe he can achieve even that modest target in five years.

But Alan Greenspan, the cool chairman of the Federal Reserve, is going along with George Bush and agrees with the backers of the US President that a higher rate of economic growth in the US will solve many of its economic problems.

He expects a high economic growth of 4.5 to 5 per cent in the US this year, and hopes that will solve many of its economic problems. At the same time he would not increase the Federal Reserve rate above historically low one per cent now, and urges the country to wait for some more time.

That means that he wants to go along with the cheap dollar for now or until the economic growth gets truly firmed up. The losers are countries like Pakistan which built up their foreign exchange reserve by buying US dollar or US bonds.

How much did Pakistan lose as a result of the sustained fall of the dollar ever since it began buying the dollars from the open market? Is the loss two billion dollars out of its over 12 billion dollar reserve or more for now? Only the State Bank of Pakistan can tell as it alone knows the difference between its dollar buying rates and the prevailing rate, and how much of the reserve is in dollar and how much in other currencies.

The Opec oil producers are also unhappy they are getting less in real terms by selling their oil in dollars and so have been wanting to reduce their output and raise the oil prices.

The Opec ministers meeting in Algiers have decided to reduce their output by 2.5 million barrels a day from April but will cut its special surplus production of 1.5 million barrels above the agreed quota of 24.5 million barrels a day even before that. But the ministers will meet in March to take the final decision.

Meanwhile, while Saudi Arabia prefers a price of 25 dollars a barrel, the Brend Norch Sea Crude has climbed to $29.77 a barrel and the New York sweet crude for March contract to $33.58 a barrel. Very high rates.

That means as the dollar keeps on falling we in Pakistan may have to pay more and more for oil as the Opec production-cut policy results in higher oil prides.

Pakistani exporters are also getting less and less in rupees for their exports in dollars and hence the State Bank intervenes in the foreign exchange market to buy dollars so that the dollar exchange rates do not come down too low.

As a result the consumers in Pakistan are not getting the benefit of the falling dollar as they buy the goods fixed in dollars. Pakistani exporters also suffer as a result of the Euro rising against the dollar as the Pakistani goods become dear to the European consumers.

China is also wooing the European Union in a big and sustained manner. The strong euro attracts China. China's trade with European Union rose by 4 per cent in 2003 over 2002. And the fact that ten more European countries will soon be joining that union interests China a great deal.

And China thinks of the European Union as a red counter-weight to the US in the kind of multi-polar world Beijing is seeking to reduce US dominance. In an election year the US has an unemployment rate of 5.7 per cent.

Compared to that the Euro region has a higher unemployment rate of 8.8 per cent. President Bush now says that 2.6 million jobs would become available in the current year. He had earlier promised 5.5 million jobs by the end of 2004.

But 1st year the US lost 53,000 jobs instead of increasing the employment. And the Democratic contender in the presidential race John Kerry says that George Bush has the world employment record after Hurber Hoover early in the last century.

Alan Greenspan says that with the US economic growth expected between 4.5 to 5 per cent this year and the rise in productivity slowing down more jobs will become available.

An excess of volatility in the currency market is not good for any country in the long run. But when the US, which alone can print the dollar that serves as the reserve currency of most countries, lets down the dollar for years together for political reasons and expects other countries to take care of themselves by revaluing their currencies or increasing the interest rates, it is not acting in a responsible manner as the custodian of the dollar.

And that makes a strong case for the Euro to serve as the alternative reserve currency but the European Union has too many members to come up with firm monetary policies and its necessary fiscal under-pinning.

So the developing countries like Pakistan have to look after themselves by coming up with appropriate monetary policies and reducing their expensive dollar debt by using the cheap dollars.

This is not the time for heavy borrowing except at very low interest and for truly productive purposes the income of which can service the foreign loans through efficient management and prudent use of resources.

Prof. Kenneth Rogoff of the Harvard University has warned the developing countries against heavy external borrowing tempted by the cheap dollars and current low interest rates which are bound to rise soon.