THE Pakistani currency hit an all-time low of Rs 168.94 against the US dollar in the inter bank market on Tuesday in the wake of burgeoning import payments and trade deficit, signalling that demand for the foreign currency remained higher compared to its supplies.
The rupee has lost 7.28 percent or Rs 11.51 to date since the start of current financial year.
Depreciation of rupee is not good news for the consumers already hit hard by the price hike of essential commodities.
The high value of the dollar directly increases the cost of imported goods including food items and crude oil and indirectly causes high inflation.
State Bank of Pakistan had already indicated earlier that the dollar could appreciate during the current financial year due to the expected higher current account deficit.
It believes that due to higher economic activities, the import bill would be higher which could increase the current account deficit in the range of two to three percent of the GDP.
The situation in Afghanistan is also impacting our market as the people from that country are purchasing dollars from our markets because they are allowed to carry $ 10,000 with them without permission.
Indeed Pakistan has always shown open heartedness to the Afghan people but the current situation demands that this policy of allowing the Afghans to take dollars and that too in such big numbers to their country must be suspended, at least for the time being.
Pakistan and other regional countries must ask the US to unfreeze $ 10 billion dollars of Afghanistan in order to avoid economic collapse there.
On the domestic side, our authorities concerned must take the requisite to protect the people from price hike to be followed by this rupee depreciation and most importantly, the rupee value determination should not fully be left to the market forces until we substantially bolster our exports.
Imports are expected to remain high due to government’s policy of expansion and growth in the national economy and during this period, the SBP must be ready for some sort of intervention to stabilize the rupee.