The dollar soared considerably high on Wednesday touching a new height of Rs 109 with serious consequences such as the possibility of high cost of industrial production, increasing the cost of food and ending up setting off the inflationary hurricane that will affect most segments of economy. Owing to the fact that Pakistan happens to be net importer of oil, a general price hike will be much faster than being anticipated.
While some of the government circles are confessing to the fact that the fallout has resulted from reliance on IMF, Governor State Bank has dispelled the perception that the dollar has gone up solely because of harsh conditionalities from the IMF is unfounded. He laid the blame on the doors of the market forces largely the currency dealers, who he accused of being responsible for perpetuating the process of dollars’ flight abroad. In a way the problem also pertains to disregard for rule of law, particularly given the phenomenon of smuggling of dollar to Afghanistan and India, which is greatly pushing the rupee down below.
Hanging on the hope that the situation will improve with fresh inflows of dollars from the IMF might prove over-optimistic. The catch is that it might not be completely wrong to turn to the IMF given the limited options our financial wizards have, the policy of paying off a loan with another loan is an erratic one. IMF is generally seen as a bad influence on economy; in reality it could be but our own candle-end economies are also questionable.
As of now the merchants seem to be losing faith in the Central Bank’s capability to stabilise the rupee. Turns out, the finance leadership is not as strong as it often claims to be. Since the rupees’ devaluation has been consistent it reflects a sloppy approach by its finance experts. The government clearly has to do a lot more than what it is doing at the moment, which seems to be depending on just IMF.