Besides the failure in the government’s economic policies, the outgoing year will be remembered for the historic fall of the rupee. The domestic currency fell over 15 percent since the start of the year and was recorded at Rs178.15 against the dollar in the inter-bank market on December 28, hitting to its historic-low level. With just few days left for 2021 to end, there is no opportunity for the currency to regain its value. What is worse is that different policies of the government to curb this fall have failed immensely.
Following the takeover of Afghanistan by the Taliban, the State Bank of Pakistan (SBP) had imposed a limit on the amount of dollars allowed to be cashed per day. But despite this, dollars exceeding the amount have been cashed out in the ‘grey market’ and flown into the neighbouring country from Pakistan. The SBP’s attempt to inject cash into the economy plus the financial aid deposited into the bank from Saudi Arabia too did little to recover the depreciating currency. In fact, the measures taken by the government to regulate the sale and purchase of foreign exchange has only pushed speculators to operate in the open market where the rupee was recorded at the historic high of Rs181.20 against the dollar.
With the mini-budget passage at a halt, it is safe to assume that the coming year will begin on a depressing note of a weakening rupee. The budget that will slap Rs360b in taxes is part of the prior actions required for the resumption of the $6bn IMF programme. Without the cash stimulus by the Fund, the rupee is said to go up to Rs190 in the open currency market. And the presence of the above-mentioned ‘grey market’ puts pressure on the rupee, which could further deteriorate its value.
It is pertinent to note that the black market exists despite the Federal Investigation Agency’s (FIA) efforts to restrict the increased outflow of dollars. Whether a government-led crackdown on the market would bear any fruits is anybody’s guess. What the economy needs is to get out of this spiral of rising inflation and falling rupee by implementing long-term structural reforms. Quick-fixes have only led us to point zero.
