Due to the political instability in the capital, there were speculations of a stock market decline. The country witnessed the situation unfold when the price of the Pakistani rupee dropped three percent (Rs108.25) on Wednesday. The exchange rate that has remained the same, Rs104.8 to the dollar, since the spring of 2014 had suddenly gone down.

Despite the currency being overvalued in the last three years, nothing was actually ever done about it. That has had a great effect on the exports of the country. Even the currencies of countries competing with us in the market had depreciated but ours remained stubborn at the value. Traders have enjoyed the benefit of the consistency because it keeps exchange rates consistent.

However the step to devalue the Pakistani rupee was long due, but not as it has unfolded. The State Bank of Pakistan is in charge of the exchange rate, and controls it in various ways. It is mostly done through buying and selling dollars from the interbank but since our country claims that the exchange rate is market determined, this move becomes risky and accessible to the IMF; whose economic programme we follow. The subtle way to do it is through phone calls but this time around, none were made and the move was finalised.

The statement given by the State Bank is that there is an external account deficit and in order to cater to that problem, the depreciation was a necessary move. And it was not a sudden decision but had been a major discussion point since the last few months. The Finance Ministry seems to have no clue about the situation.

Finance Minister, Ishaq Dar, is upset with the decision and has called a meeting. In a recent statement he also implied that this depreciation and the reason given to it is artificial. He believes that it is a move by individuals and banks to hurt the ruling party and take advantage of the current political scenario.

Despite his indignation, Mr Dar is not in a position to revert the decision because that would mean a clash between the government and the regulators; something that they cannot afford at this point. At the same time, those claiming that it is a result of the JIT difficulties need to understand that trade markets do not work like this. This move will help the economy.

However, the urgency of the decision is something that bothers everyone. Calculated moves are announced before hand and also take the necessary stakeholders in confidence.