The devaluation would have boosted export earnings but not due to inflation, analysts said. Photo: File
Islamabad: As the value of the rupee fell to the lowest level, economic difficulties increased.
The Pakistani rupee has been depreciating at the lowest level against all other currencies since the beginning of this year in January when the currency was left to be determined by the market. The currency index currently stands at 84.6.
According to the index, if a currency stays between the level of 95 to 105, then it is devalued, that is, at that time the rupee is far behind its original value, in which case additional income comes in the form of exports. However, imports are discouraged.
According to the Central Bank of Pakistan, the Real Effective Exchange Rate (REER) of the Pakistani rupee, compared to other currencies, further decreased in value by 7.52% during February and reached the level of 86.4% in the index, while January It was at the level of 93.96 during By the end of the business day on February 28, one dollar was worth 261 rupees 50 paisa in the interbank market.
On the auspices of the International Monetary Fund (IMF), the government of Pakistan introduced a market-fixed system in January, after which the rupee became unstable and overvalued due to the lack of dollars in the market. There was a decline and the dollar reached its highest level on February 2 when one dollar was equal to 285 rupees 9 paise.
Yusuf Rahman, head of research at Khadim Ali Shah Bukhari Securities, told Express that according to the REER, the Pakistani rupee is below its original value, but due to rising inflation, there are chances of improvement in this index in the next few months. .
He said that the rate of inflation in the country was 31.5 percent during February, which was the highest in fifty years, but there is a possibility of further increase in this rate and reaching 35 percent in March.
He further said that the reasons for this increase include the implementation of new taxes worth 170 billion rupees by the government, besides the increase in the prices of petroleum products, increasing the general sales tax from 17 to 18 percent and all these measures came. Done on the instructions of MF.
Yusuf Rehman said that the weakness should have been in exports due to the rupee, but due to the partial ban on imports and the enormous decline in the value of the rupee, inflation and the increase in interest rates, it was not possible to increase exports much. Most of the exports are to America and European countries, but due to the economic slowdown and reduction in the purchasing power of the people, the demand for export goods has decreased in their local market.
Yusuf Rehman said that Pakistan can be taken out of the economic and financial crisis only through the restoration of the IMF program, but it will take time because for the restoration of this program, Pakistan is assured of 6 to 7 billion dollars of loan from friendly countries. It will take decades.
Economic analysts say that if the IMF program is restored, the value of one dollar can be equal to 275 rupees.
(function(d, s, id){
var js, fjs = d.getElementsByTagName(s)[0];
if (d.getElementById(id)) {return;}
js = d.createElement(s); js.id = id;
js.src = “//connect.facebook.net/en_US/sdk.js#xfbml=1&version=v2.3&appId=770767426360150”;
fjs.parentNode.insertBefore(js, fjs);
}(document, ‘script’, ‘facebook-jssdk’));
(function(d, s, id) {
var js, fjs = d.getElementsByTagName(s)[0];
if (d.getElementById(id)) return;
js = d.createElement(s); js.id = id;
js.src = “//connect.facebook.net/en_GB/sdk.js#xfbml=1&version=v2.7”;
fjs.parentNode.insertBefore(js, fjs);
}(document, ‘script’, ‘facebook-jssdk’));