Dollar Rising

2018-06-14T00:17:57+05:00

The government turnover brings in its wake an impending currency crisis with the US dollar hitting a high of Rs115.50. Where currency dealers suspecting the government’s commitments to foreign monetary bodies being the cause behind the sudden rise, the rising interest rates on the back of currency devaluation creates an environment that discourages investments, hinders job generation and entails struggle for the common man.

The Pakistani currency is a managed float, regulated by artificially managing the US dollar reserves, not overly liable to the fluctuations of the wider global markets. Where economist experts have long broached bringing the Pak rupee closer to the form the artificially regulated equilibrium, the caveat remains that such a change has to be introduced gradually. So what does the sudden devaluation entail for the common man? It means that there is a rise in cost of imports and a corresponding hike in fuel prices. With an industrial and agricultural sector heavily dependent on imported constituents for production and a hike in fuel cost increasing the cost of transportation, the cost of goods exponentially increases while affordability plummets; produce becomes expensive, so do basic commodities; inflation- particularly wage inflation- rises and a country wide recession ensues. For the common man it becomes hard to afford every day essentials, afford fuel or maintain a decent standard of living.

On the flipside, it can be argued that such a measure might intend to strengthen the Pak Rupee and to put balance of payments in Pakistan’s favor by strengthening exports, and discouraging imports, hoping for the dollar reserves to stabilize. However, with an ever-gaping trade deficit, escalating dollar denominated foreign debt repayments, and dwindling foreign exchange reserves the devaluation of the currency might not have the remedial effect that is intended.

In the long run, our economy needs to concentrate on building an indigenous pool of local capital, committing to local resources and inputs instead of imports and de-linking our currency with the USD whilst partaking in free global trade.

View More News