Is the dollar on the way to crush economy?
ISLAMABAD: Is the dollar on the way to crush economy and consumers in Pakistan? It appears evident from an unbridled and hasty flight of the US dollar against the Pakistani rupee soon after the appointment of the caretaker prime minister posing a threat to the economy and the inflation-hit consumers.
On Wednesday, the dollar-rupee exchange rate further widened to 294 rupees in the interbank trading and 303 rupees in open market trading.
After the appointment of the caretaker premier, the US dollar has gained more than six rupees value in the inter-bank and open market trading in just two working days (August 15 and 16).
The way the US dollar is dredging the value of rupee, it appears that the economy and the consumers will get into serious trouble in the days ahead.
Meanwhile, on Wednesday (Aug 16), at the commencement of morning’s trading session, the US currency experienced a surge of Rs2 in the interbank market. The value of the dollar against the Pakistani rupee reached Rs294 in interbank trade.
Notably, this consistent ascent in the dollar’s value follows the dissolution of the National Assembly and the assumption of power by the caretaker prime minister.
Furthermore, the lifting of import restrictions has spurred an uptick in the demand for the dollar. Additionally, the IMF’s disbursement of the first tranche exceeding Rs1 billion has bolstered the strength of the greenback.
In recent weeks, the rupee has faced mounting pressure due to various factors, including escalating inflation, political instability, and an expanding current account deficit.
Sri Lankan rupee recovers after IMF deal, Pakistani rupee sinks further
Meanwhile, Pakistan’s bailout package deal with the International Monetary Fund proved more fatal for the local currency in comparison with Sri Lankan currency.
On Wednesday, the Pakistani Rupee (PKR) fell to 303 rupees in the open market trading. In inter-bank trading, the dollar-rupee exchange rate widened to 293 rupees.
In sharp contrast to this, the Sri Lankan rupee posted a significant gain after the IMF’s loan approval for the country. When Sri Lanka declared default, its currency depreciated to 364 rupees to a dollar.
However, when the IMF approved a bailout package for Sri Lanka in March this year, Sri Lankan currency started regaining value.
Consequently, by Tuesday (August 10), the Sri Lankan rupee has improved to 323 rupees to a dollar.
Notably, the IMF has given 48 months arrangement to Sri Lanka involving $3 billion. However, in the case of Pakistan, the IMF approved only a 9-month stand-by arrangement worth $3.2 billion.
For Pakistan, the IMF has demanded a market-based exchange rate _ opening the way for further devaluation of the rupee amid multiple factors.
Surprisingly, the value of the Sri Lankan rupee has improved significantly after the country got the IMF loan.
However, the IMF package did not support the Pakistani currency because of its harsh and bizarre conditions.
