The Pakistani rupee slumped 3.8 per cent against the dollar on Monday before slightly recovering in what appeared to be the third currency devaluation in seven months by the State Bank of Pakistan, amid a balance of payments crisis.
The rupee drop threatens to squeeze consumers, coming just days before Eidul Fitr and ahead of the July 25 general election.
The apparent devaluation shows signs of vulnerability in the country’s nearly $300 billion economy, as dwindling foreign reserves and a widening current account deficit trigger speculation about going back to the International Monetary Fund (IMF) for loans for the second time since 2013.
Economist Ashfaque Ahmad Khan said the interim government that held the reins during the election campaign might itself be forced to go to the IMF. He said the interim government needed to take policy decisions to curb imports and increase exports, but so far the caretaker government had not taken enough steps.
“If we rely exclusively on the rupee devaluation to address our balance of payment crises, this will have disastrous consequences,” he said. Since December, the rupee has fallen by about 14pc. The rupee closed at 119.85 per US dollar on Monday after opening at 115.63. Earlier in the day, it traded close to 121 per dollar, traders said.
Published in Daily Times, June 12th 2018.
