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Tuesday, February 7, 2023
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Rupee turmoil

There is no end to free fall of rupee that has dropped to a new all-time low amid higher import payments and worries about the outlook for the country’s external sector. Reportedly, the rupee closed at 177.43 to the dollar. The local unit has weakened 11.21 percent so far this fiscal year. There are a number of reasons for the present fall. Experts believe that the rupee was enjoying artificial hike and it was overvalued in the past. It is also being argued that the fall has come after the tightening of monetary policy by the IMF and the depreciation has been allowed under the instructions of the IMF. Precisely, we are losing value of our money and the situation demands effective positioning of our finances to navigate through these rough waters.

It is believed that depreciation of rupee can give a boost to exports, which is deemed crucial to keep products competitive in the global markets. But this positive trend is only short term as it cannot bring overall stability to the country’s economy. There are two opposing views about the depreciation of currency. Exporters believe that devaluation of Pakistani currency is necessary for increasing exports while policy makers oppose this trend on the ground that it only jacks up inflation rate in the country. According to them it is not a substitute to the economic growth.

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At present our country is struggling to increase its exports. Another problem for Pakistani economy is that it is heavily dependent on imports for even basic commodities. The depreciation of Pak rupee raises import costs and ultimately brings more inflation. Secondly the debt servicing cost of foreign debt also becomes very high for the nation. Thus, depreciation of Pak rupee is not without risks. From essential commodities to the glamorous gadgets, the depreciating rupee hurts in many ways. Continuing rupee fall makes crude oil, fertilisers, medicines etc. costlier.

The real way to maintain a balance is to increase productivity and focus on subsidies on selective export items besides controlling imports to live within the means the nation can afford. In this regard, the government can abolish GST on certain export items for making them affordable in the international markets. The government needs to focus on the management of resources and keep a balance in export and import sectors.


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