And the country, for that matter
The rupee was bound to come under downward pressure sooner or later, and who better than IMF big-shots to remind us that the national currency has been overbid all year long. Few prizes for guessing how the finance minister would have felt about the finding, especially since only recently he had to admit to the Fund – and, reluctantly, the public – that last year’s growth rate, so celebrated at budget time, was false. It was not ‘highest in four years’, as the government had us believe, but rather lowest in three – not as deserving of a pat on the back as the ministry’s original projection. The rupee, too, it now seems, was buoyed by external forces not intrinsic economic growth, and it takes more than one time inflows to prop up currencies for long.
But there is more to the rupee slide than our own economic managers’ irrationality, even though irrelevant politics and imprudent economics have played no small part. The dollar, it bears noting, is the international safe haven currency, which means it registers strong inflows in times of global turbulence. So, as the Ukrainian crisis unfolded, Syrian civil war worsened, Iraq mutated into a sectarian death rattle and Palestine became victim to another round of Israeli aggression, the dollar was bound to record very strong uptick. This process has contributed to visible declines in currencies it trades the most against, especially the euro and Japanese yen. Pakistan’s rupee, too, will be among its victims.
It is also significant, though, that our currency will not have the potential to rebound like others when the present round of tensions subsides. And the reason is the host of complexities and irregularities in our real economy. But while the rupee is low, it would help to boost the export sector, especially with regard to the European market where we have been unable to take proper advantage of the EU trade concession.
There are other problems, too, like the UN’s Human Development Index (HDI), where Pakistan’s position has remained stuck at 146 (out of 187) for five straight years. This means that both good governance and economic management are areas where much still needs to be done. And unless those in charge take necessary steps urgently, it will be a lot harder to save the rupee, the wider economy, and indeed the country.
