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Rupee slaughtering cost Rs3 trillion in a year to consumers, importers

Rupee slaughtering cost Rs3 trillion in a year to consumers, importers

Exclusive Report of The Truth International magazine

Pakistani Rupee (PKR) has become unstable and vulnerable during the past year. Even the unending ongoing government-IMF talks over the resumption of the stalled loan could not lend support to the falling rupee value. During the last year, (April 2022 to March 27, 2023, after regime change), the Pakistani rupee has lost a massive and heart-breaking value against the US dollar and other major currencies. The coalition government inherited the dollar-rupee exchange rate at Rs 175 in April 2022. These days, this exchange rate is hovering around 285 rupees in the inter-bank and over and above 290 in open market trading. Thus it shows more or less 110 rupees massive depreciation in the value and worth of PKR versus the US dollar.

The political and economic uncertainty that gripped the country after regime change left the rupee orphan and the US dollar kept on butchering its value day by day. Some PML-N leaders _ a main political party in the coalition government with its prime minister Shehbaz Sharif started targeting then-finance minister Miftah Ismail, saying he was responsible for the economic meltdown though Miftah successfully secured the IMF bailout package in August last year. According to the London Plan, Miftah Ismail was removed as the finance minister in an unceremonious way, which Miftah himself termed insulting to him and the party policy. Then the PML-N ‘most talented man’ _ Ishaq Dar was inducted into the federal cabinet.

Impact of Rupee Depreciation & Inflation

A simple method to evaluate the impact of rupee depreciation on consumers is an increase in imports. For example, in Feb this year, the imports of Pakistan closed at $4 billion and the importers have paid Rs 440 billion additional amount just because of the depreciation of rupee value. And who will be the victim of the rupee-slaughtering _ obviously the consumers. This additional financial burden on importers/consumers is for the month of Feb-2023 alone. And if you calculate the total impact of rupee depreciation on imports/consumers _ it will be greater than Rs 3000 billion in the last one year. And this does not include the impact of increase in prices of essential consumers items _ petrol, electricity, gas, cooking oil/ghee, sugar, flour, fruits, vegetables, and many more. The 46 per cent short inflation, week-on-week basis and 32 per cent in year-on-year basis reflect the holocast of just rupee-slaughtering, and bad governance. Also, billions of rupees increase in the dollar-denominated foreign loans is another horrible aspect of the deepening economic crisis. Financial analysts believe that the rupee devaluation has added 3.8 trillion rupees to the national debt.

Interestingly, when Miftah Ismail was the finance minister, the International Monetary Fund did everything in a hurry to bailout package and released the tranche in August last year. However, as the PML-N’s powerful economic wizard has replaced Miftah Ismail, the IMF people are giving a very tough time to the Dar-led economic team, government, and the consumers as well. Importantly, the government has fulfilled all the upfront conditions, including the harshest ones pertaining to massive increase in the cost of utilities and rupee-slaughtering, still the IMF wizards are showing no leniency and asking for do more. The last thing the IMF has been demanding these days is the written guarantees from the friendly countries of Pakistan _ Saudi Arabia, China, and the United Arab Emirates, about their foreign financing to Pakistan this year. It is because the IMF has estimated a $6 billion gap in the financing and expenditures of Pakistan by June 2023.

Meanwhile, before taking oath as the finance minister, Dar vowed to push back the value of the greenback to around 200 rupees. At that time, the dollar-rupee parity was around 226 rupees in the inter-bank and 234 in the open market trading. From April 2022 to Sept 2022, dollar has gained more or less 50 rupees in the inter-bank and 55 rupees in the open market trading. However, a short-lived miracle occurred when Ishaq Dar became finance minister and the exchange rate of dollar to a rupee fell below 216 rupees in the inter-bank. As mentioned earlier that it was a short-lived miracle, the exchange rate took a forward gear with a full speed and these days the value of dollar has ballooned to 285 in the inter-bank and above 290 in the open market trading.

In the grey market, known as black market, dollar is being sold above 300 rupees and the exact price of the greenback is determined according to the capacity and influence of the buyers. Thus, just one condition of the IMF _ free float of dollar_ has ruined everything in Pakistan. For example, dollar was available between 220 to 222 before the implementation of the IMF-dictated free float regime and these days, dollar is close to hit 300 rupees as IMF people are sticking to the completion of their upfront measures, causing an unexpected delay in the resumption of loan.

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Javed Mahmood
Written By

I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.

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