According to the director of the monetary policy of the State Bank of Pakistan, the recent political confrontation is responsible for devaluation of the Pakistani rupee, which has not only increased inflation, but also jeopardized the smooth supply of daily use items across the country. Talking to journalists on Friday, he says that though the political uncertainty is blamed for the devaluation of rupees, it is hoped that devaluation will prove to be a temporary phase and the rupee will regain its strength. He also hoped that the flow and outflow of dollar will remain normal in the coming days, but it is premature to say that how resilient is the country’s economy to absorb any unexpected shock of inflation.
The SBP official noted that economic indicators are promising, fiscal deficit has been reduced and the current level of inflation should not be allowed to pressure the government to revise its monetary policy. The private sector has now a better opportunity to get the bank loans as the government has now been less dependent on local bank borrowings. However, the government would have to play its role to face challenges confronting the country’s economy.
Apart from the government machinery, there are other players sitting on the fence and waiting for an opportunity to exploit it in their favour. Earlier, the Pakistani rupee had jumped from 92 to 106 and on some occasions it was even sold at 110 against one dollar and rumors were ripe that the rupee will only stop at 124. However, the timely policies by the government salvaged the rupee value down near 99. The outsiders are again active and the government must come to protect the rupee. After all it is the present government’s responsibility to maintain order whether political or financial as long as it is in the office. It is no denying the fact that some fringed benefits are attached with the devaluation of rupee, but these are only harmful for the economy. The amount of foreign loans also multiplies with decrease in the value of the local currency whereas the state has to pay more on imports. It is also a fact that unrealistic approach to arrest the falling value of the rupee also gives negative results and the example of Iran is before us in this regard. In Iran, there was a little difference between official value of rial against dollar, but there was a gulf of difference between their values in the open market.