It is quite difficult to say how much time will the incumbent government need to put a stop to currency’s free fall against dollar. On Tuesday the rupee tumbled as much as 7.54% to Rs 133.64 to the US dollar in the inter-bank market. According to State Bank of Pakistan the rupee closed at Rs133.6431 to the dollar, showing a drop of 7.54%, or Rs9.37, compared to Rs 124.2699 on Monday. In the early hours of the day’s trade, the rupee hit a historic intra-day low of Rs 137 to the greenback. “This movement broadly reflects the current account dynamics and also the demand-supply gap in the foreign exchange (inter-bank) market,” the central bank said in a statement after the market closure. “SBP will continue to closely monitor the situation and stand ready to intervene in case of any unwarranted volatility in the foreign exchange market,” it added.
On the other hand the State Bank of Pakistan (SBP) said that the foreign currency reserves had plunged to a low level of around one and a half month of import cover at $8.40 billion on September 28, 2018. The devaluation of currency is the result of widening current account deficit, which continues to exert pressure on the country’s external balance. Although the economic experts believe that the deprecation of rupee was imperative to maintain the balance of payments challenge but the fact is that it takes a heavy toll on our economy. As per estimates one rupee increase in exchange rate adds approximately some “85 billion rupee” to the country’s foreign debt and liabilities quantum in term of Pak Rupee. But for the incumbent government, regardless of its commitments and tall claims of not approaching to world financial institutions, there seems no other alternative other than approaching the IMF for a bailout package to navigate the country out from the current crises. Further delay in seeking bailout package from IMF may probably cause further devaluation of currency. However, the government’s financial team working under the stewardship of federal finance minister should chalk out a comprehensive policy and plan to seek a bailout to stabilize its economy. There are indeed a number of other challenges the country is facing right now but stabilizing the economy should be incumbent government’s top most priority. As without fixing the financial woes the government can not be able to implement it’s reforms agenda, which it had so proudly announced soon after taking reins of power. It is also imperative that government’s Economic Advisory Council (EAC) should come forward in a big way and pool their efforts to help out the finance ministry in formulating financial policies and continued social and economic advancement in the country. To overcome the current account balances the government also needs to explore ways and means to boast exports and encourage foreign investment in the country. However, this is possible only if there is peace and political stability in the country.
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