Rupee tumbles further

PANIC gripped market on Monday as the State Bank of Pakistan allowed the rupee to shed its value for the fourth time in a row, sending out message that the measure is aimed at slowing the depletion of foreign exchange reserves before a national election in about a week’s time. The currency, whose rate is set by the central bank, dropped as much as 5.3 percent to 128 per dollar at the close, according to a statement released by SBP. The rupee is the worst performer in Asia this year, according to a basket of 13 currencies compiled by Bloomberg.
The remarks and justification offered by the State Bank and tacit approval of the massive devaluation of rupee by the interim set-up is a clear testimony that this is not the end and people of Pakistan should get themselves prepared to receive further shocks in weeks to come. According to State Bank officials, the increase in exchange rate has also increased the country’s foreign debt volume by 800 billion rupees pushing it to 8120 billion rupees. The sharp fall in the value of rupee also means a corresponding increase in prices of all imported items including raw material and therefore, a fresh cycle of price hike. The caretakers repeatedly hiked the prices of POL products on the pretext of increase in oil price in the international market and devaluation of rupee. It provided an insignificant relief to the masses by decreasing the prices recently after intervention of the Supreme Court but the latest devaluation means consumers should be ready for a phenomenal increase in prices of POL products. Those sitting in cosy drawing rooms are offering philosophical reasoning for letting the rupee become an orphan but people have seen no positive aspect of the move during the last three devaluations and instead prices of all products and services have gone up. Apart from price hike, the devaluation also has other dimensions as was reflected by 1.5% decline in benchmark KSE100 Index as the currency devaluation has reignited a concern over the macro economic situation of Pakistan. Some experts have opined that devaluation was a smart move as the government wanted to get some extra space before entering negotiations with IMF for another bail-out package. Others say the economy was doing well but political instability, which drifted focus of the authorities away from real economic issues, compounded financial and economic woes of the country. Under these circumstances, it would be a big challenge for the next government to come up to the expectations of the people despite the fact that the interim government was trying to mitigate its challenges by taking highly unpopular measures.

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