As the rupee has been enduring the worst depreciation in over a month and may go on until dollars from the International Monetary Fund (IMF) land in the central bank, Finance Minister Miftah Ismail is hopeful the rupee would be in the recovery mode in the next two weeks. Other than the delayed IMF bail package release, the other glaring factor pushing the rupee downward is political instability. It is hard to comment on the currency market’s trend, but several local factors have contributed to speculations, reinforcing dollar flight and rupee devaluation. The minister’s assurance of rupee recovery should come as a sigh of relief for investors whose worries about default are doing the rounds. The last two weeks saw the rupee tumbling by 7.6 per cent to Rs228 to the dollar. This was not a new phenomenon as the rupee has failed to stage a recovery mode in the last two years. But one thing which the finance minister chose not to address is that the expected $1.2 billion loan cheque from the IFM will be too insufficient to address the mounting balance of payment. The weak rupee recovery, in turn, will erode investors’ confidence and the people have to talk about the imminent default, which has become a common word after Sri Lanka’s economic disaster and its inability to pay its foreign debt in May. The Sri Lankan experience shows that political crises refuse to go when the economy is weak. Sri Lanka saw then-president Gotabaya Rajapaksa flee mass protests into exile.
Finance Minister Miftah Ismail is taking to the press repeatedly to dispel the impression of default. Naturally, a nuclear state’s default would have far-reaching consequences on regional and international circumstances. Those in the government and the opposition should blame themselves for the current situation. Every bad news is linked to the political turmoil which started earlier in the year, and is ongoing despite the change of government in the centre. If politicians do not sit together, public anger will be directed to both sides. The soaring prices have fuelled anger everywhere.