Friday
March 29, 2024
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Lahore
EditorialValueless currency

Valueless currency

While it has happened before in recent months, on Thursday the Pakistani rupee displayed the sharpest negative movement and plunged sharply, losing Rs18.74 against the dollar. According to information provided by the Exchange Firms Association of Pakistan, the decline caused the local bill to plummet to a historic low of Rs 284.05. This is a single 7.04 per cent decline caused by the government’s deadlock with the IMF. The recent decline is mostly the result of the currency market’s anxiety surrounding the IMF’s delayed financing. The IMF recently requested Pakistan to exchange dollars at the going rate for trade with Afghanistan under a staff-level agreement. Instead of the open market or interbank rate, the true rate should be that of the underground market. They are correct, as the current availability and transaction of dollars are solely in the grey market.

The finance minister is a well-known currency manipulator. During his stint as finance minister from 2013 to 2017, he artificially held the dollar rate at Rs103, but this time, the IMF has rendered him helpless through stringent stipulations. Because of the numerous limits placed on foreign exchange businesses’ purchasing and selling of the dollar, it does not come and go. The dollar has a black market, but the government is responsible for this since our actions have substantially aided the grey market.

The dollar’s appreciation coincides with Pakistan’s economic problems, which have caused its foreign exchange reserves to drop below $4 billion.  The artificial ceiling on the value of the dollar was lifted at the end of January, according to an announcement made by foreign exchange businesses in Pakistan. This led to some stability in the currency market and the IMF team’s arrival.  The agreement about Pakistan’s loan programme has not yet been announced by the IMF and the only way to stop the rupee’s collapse is for Pakistan and the IMF to reach an agreement. One of the things the IMF wants Pakistan to do is switch to a market-based exchange rate system. If the IMF’s board approves this measure, a financing tranche of over $1 billion that has been held up since late last year over a policy framework will be released. We can only hope for a better future during these difficult times.

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