The rupee, reserves and their manager
There are two undeniable facts about the recent accolades that both Mr. Ishaq Dar and Mr. Ahsan Iqbal graciously accepted from a private publication by the name of ‘Emerging Markets’. One, that the publication has nothing to do with the IMF and two that the paper received funding in the form of advertisements from four public enterprises including National Bank therefore rendering the awards meaningless.
In a report published by the IMF some facts about the state of our economy were highlighted as well – facts that our economic managers should be concerned about more than procuring dubious performance awards. The IMF mission chief expressed concern that our foreign exchange reserves – built mostly upon foreign loans- are not at ‘comfortable levels’. On the Rupee he said that it is overvalued by 5% to 20% making our exports less competitive. Nonperformance of publicly owned companies is also apparent with huge accumulative losses of 1.36 trillion rupees at the end of the three year IMF program.
Keeping the rupee at the 105 level is something of a hobby and ego battle for Ishaq Dar. Interbank injections via already low reserves to maintain the Dollar/Rupee parity had been his forte since taking office. It is therefore no wonder why demand for our exports is so low – they are unnecessarily more expensive than regional competitors.
The massive losses incurred by state owned enterprises are a result of gross incompetence of management and a reluctance to introduce capable professionals. The government failed to fulfill the privatization requirements in the IMF program as well, now that the program has ended there is no urgency to discuss those reforms anymore.
While other countries depreciate their currencies voluntarily to maintain competitiveness internationally, we continue to hold on to fabricated levels at the cost of much needed revenue from trade, something that would organically increase our reserve levels as well. The government should rethink its current economic strategy before it is too late and our economic fault lines turn into an unmitigated disaster.
