The greenback’s value has increased to 148 to reach an all-time high and the speculations are that the local currency will depreciate further. Fears of further devaluation as a result of the agreement with the IMF have depressed the currency market and the rupee may lose more against the greenback in the coming days.
Most of the currency dealers and experts have expressed their disappointment over the undisclosed conditions agreed between the IMF authorities and the government. Once the IMF Loan is given, the country has to take actions to implement IMF conditions under which the Loan was given. To do that, the Rupee will surely decline further against the Dollar. How much lower would it go against the Dollar is any one’s guess at this stage.
Currency appreciates only when rest of the world want to buy country’s products and services and also when country’s imports are less than their exports. In a free trade scenario the depreciation of Pakistani currency would fix trade deficit in few years without any intervention. Just free trade with India and China should fix our trade deficit under current Exchange rate but there is no free trade. The market fundamentals work in favor of Pakistan but by somehow the government and bureaucrats never let the private sector to flourish – electricity shortage, gas shortage, corruption, water shortage, skilled labor shortage, lacking roads, railway …. List is long.
The weak economy of Pakistan, of lately has come under tremendous pressure recently due to uncertainties created in the financial market in lieu of signing of IMF bailout agreement. The stock exchange turmoil resulting in across the board fast decline of its index during recent days, further added on to already existing literariness and panic, mainly because of IMF conditionality of allowing free float of PKR against the dollar.
The Pakistan’s currency is more or less following the recent similar pattern of events in Egypt, which taking $12 billion IMF loan agreed to a condition of free float of its currency against the dollar. As a consequence, it is no surprise that as Egyptian Pound devalued by 50%, PKR by following suit already suffering 36% devaluation, reaches devaluation goal of 50% by July, 2019, when terms & conditions of the IMF agreement come into play under the stewardship of new GSBP, having successfully done the same in Egypt during his past assignment as IMF representative.
Speculators having a field day. Common man will suffer going forward. By the time of the next elections rupee may score a double century. This is alarmingly evident now that PPP & PML-N had fully planted and functional economic terrorism. PTI government might control this but proper policies will be needed to tackle this situation.
