What was being warned by economic experts from early on is now rearing its ugly head on the government. Defying the hopes of stabilizing after Saudi Arabia deposited the $3 billion lifeline at the State Bank of Pakistan (SBP), the rupee further weakened to the record low of Rs177.43 against the US dollar in the inter-bank market on Wednesday. The lifeline was said to stabilize the rupee at around 175. It must be noted that in the open market, the local currency dropped to Rs179 per dollar. This unpredicted fall adds to the agitation being faced by the incumbent government that is all set to present the mini budget in line with the IMF’s ‘prior actions’ that would further deteriorate the fiscal discipline of the country. And all this at a time when the current account deficit with the spike in the import bill to a record high at $8 billion.
Finance adviser Shaukat Tarin states the situation is temporary and for the people to just give the government a matter of ‘few months’ as the mini budget would also support the stablisation of the rupee. But perhaps he must be reminded that the ruling PTI has been singing the mantra of ‘few months’ since it came into power in 2018. From an end to corruption to curbing fiscal deficit, all aspects were said to be ‘fixed’ in few months. But more importantly, it is the luxury of few months that the people no longer have. The skyrocketing inflation rate of 11.5 percent recorded at the end of November has already diminished the purchasing power parity of the average citizen. The government seems to be too focused on the Fund’s ‘prior actions’ that it has ignored the need to take actions to curtail the faltering economic situation.
Pakistan is an import driven country and the rising imports is one of the reasons behind the weakening rupee, which has depreciated 16.52% in the past six months. Moreover, dollars flowing into Afghanistan and illegal smuggling of wheat to that country, is adding pressure to the domestic market as well. The government’s top priority should then be to curb the rising imports, while also ensuring that the economic crisis next door does not affect this country. With the falling rupee, the standard of living for many in the country has also already depreciated.