ISLAMABAD The value of the pakistani rupee has fallen by30.5 percent against the US bone over the last three times and four months under the government of Pakistan Tehreek-e-Insaf (PTI).
The rupee witnessed massive deprecation from Rs123 against the US bone in August 2018 to Rs177 against the US bone in December 2021, a decline of30.5 percent over the last 40 months. This makes it one of loftiest devaluations of the currency in the country’s history. The only other advanced devaluation passed when Dhaka fell and Pakistan’s currency was devaluated by 58 percent from Rs4.60 to Rs11.10 against the US bone in 1971-72.
Numerous independent economists argue that this recent devaluation of the currency was mandated by the IMF through previous conduct and it has nothing to do with macroeconomic fundamentals.
Dr Ashfaque Hassan Khan, a former profitable counsel, said that there was a complete breakdown of profitable policymaking as the country’s financial policy had come subservient to financial and exchange rate programs. He said that the financial tightening and exchange rate deprecation redounded in advanced affectation, public debt and debt servicing. The empirical substantiation showed that the one percent financial tightening hiked the inflationary pressure by1.3 percent in the case of Pakistan.
Experts say this massive devaluation of currency under the PTI goverment fueled inflationary pressures, adding that two major factors contributed to the price hike. First, the prices of food and goods as well as energy prices soared in the transnational request, and second, the deprecation of the exchange rate by30.5 percent also led to advanced affectation.
Some studies conducted by economists suggest that 10 percent devaluation of the currency raised the Consumer Price Index (CPI)- grounded affectation by0.6 percent. As a result, the30.5 percent deprecation redounded in adding inflationary pressures by roughly two percent. This indicates that from the affectation standing at11.5 percent on a yearly base, nearly two percent comes through deprecation of the exchange rate.
An analysis of indigenous currencies versus the US bone shows that the Pakistani currency endured massive deprecation compared to others.
The Indian rupee stood at75.39 against a US bone. The Indian rupee stood at Rs70.09 against the US bone in 2018, Rs73.66 in December 2019, Rs74.53 in March 2020 and Rs74.57 in April 2021.
In the case of Bangladesh, the Bangladeshi Taka stood at85.76 against the US bone and it floated around 84 to85.9 on average over the last two times.
Meanwhile, the Pakistani rupee continued to fall in value and stood at Rs177 against a US bone in December 2021. It downgraded sprucely from Rs123 against to Rs177 against a bone over the last three times and four months.
Rupee and Insecurity
During the Musharraf-Shaukat Aziz governance between 1999 and 2007, the country’s currency remained largely stable and floated around Rs60 against a US bone. When the PPP- led governance came to power in 2008, the rupee downgraded as a result of a rising current account deficiency and slid to Rs80 just in a many months.
Also, the rupee further acclimated against the bone in a gradational manner after Pakistan joined the IMF program and remained around Rs90 against the US bone from 2008 to 2013. In June 2013, the currency stood at Rs98.5 against the US bone.
Also, the PMLN came to power in 2013. In November 2013, the Pakistani currency stood at Rs107.5 against the US bone. Former finance minister Ishaq Dar’s programs brought the rupee down to an average rate of Rs98 against the US bone in June 2014.
The Pakistani rupee remained stable at Rs100 in August 2014 while it acclimated slightly and settled at Rs105 against the US bone in 2015-16 and 2016-17. Also, former finance minister Miftah Ismail allowed adaptation of the rupee against the bone and it nosedived to Rs118 against US bone in June 2018.
The rupee continued to slide during the interim rule of a caretaker government. Still, when the PTI- led governance joined the government in August 2018, the rupee stood at Rs123 against the US bone.
Also, Pakistan joined the IMF programmer and the rupee on average farther downgraded and stood at Rs155 against the US bone in June 2019. Till April 2020, the rupee continued to cheapen to Rs164 against the US bone. In August 2020, the rupee touched Rs167.7 against the US bone.
For a brief period, till April 2021, the rupee strengthened and remained on average at Rs152 against the US bone. Since April 2021, still, the Pakistani currency witnessed a fresh surge of deprecation as the rupee on average touched Rs156 against the US bone in June 2021, Rs168 in September 2021 and Rs170 in November 2021. In December 2021, the rupee crossed Rs177 against US bone.
Affectation
On normal, the CPI- grounded affectation has floated around8.2 percent between 1991 and 2020-21. Still, now the CPI- grounded affectation has crossed double- integers and touched11.53 percent in November 2021. There are other factors fueling advanced affectation but the massive devaluation of the rupee also played a crucial part in the swell in prices over the once many months.
Economist Dr Zafar Mahmood said that the increased foreign exchange reserves help countries to initiative, but with limited reserves, there's lower room a country to stabilise its currency. Pakistan needs to make up its foreign currency reserves withnon-debt-creating inrushes similar as exports, remittances, and foreign investments.
Sajid Amin Javed, an economist from SDPI, said that the deprecation of the currency over the last three times had actually accumulated in the last eight times because the value of the rupee was instinctively raised.
He said if data of the once decade was analysed, it would show that India and Bangladesh had allowed deprecation when it wasrequired.However, it would show that Pakistan’s current account deficiency worsened but the rupee remained stable; while in India there was a lower current account deficiency but the Indian rupee downgraded from Rs63 to Rs71 against the US bone, If data from 2016 to 2018 was analysed.
He said Pakistan kept its rupee on the advanced side and so accumulated deprecation passed. He nominated this miracle as “ forced deprecation” as the foreign currency reserves depleted and the current account deficiency widened. He said the events in Afghanistan also added pressure on Pakistan’s exchange rate.
Pakistan, he said, joined the IMF programme so it was left with no other option but to insure perpetration on the forced deprecation. “ The main problem lies with our programs as it also triggers fear and query,” he added.
komal singh rajawat......................