The US dollar continues to rise against the rupee—a trend some experts largely attribute to the country’s growing current account deficit—reaching a record high. In just a week, it climbed up to 175 then took a reverse gear after the announcement of KSA’s $3 billon transfer to State Bank of Pakistan and deferred payment of $1.2 billion of crude oil. It came back to 170, and after five working days went to 176 due to the delay by the IMF in releasing a small instalment worth $300 million. There are particularly unhealthy signs and the question remains, who is to take responsibility for them?
In the last 40 months of governance under various finance ministers, the rupee fell, skyrocketed and exports remained largely stagnant. Fundamental structural flaws such as poor public sector governance and the bleeding of the public sector entities have been witnessed. There has been virtually zero privatisation and no proper 5 years plans that give the economy a particular direction. Issues related to large public sector entities incurring huge losses have been addressed partially only. Such economic fundamentals have not changed in the last week or two. There were payment pressures in October, and the same situation remains in November. Such challenges are expected to stay for the long-term.
We have gotten used to putting the responsibility of failures on previous governments but there is much in our present that has contributed to this. Covid-19 has adversely effected global economies and there is no doubt about that. However, there should have been a 5-year revival plan ready to be implemented. Then there should have been a mechanism in place to check, monitor and supervise economic progress.
Globally, it is quite common for the central bank to intervene in times when currency devaluation is so intense and unpredictable. Even in Pakistan, governments have been intervening in the past. IT is a temporary circumstance in which the government is allowed to step in and take action to protect its economy.
Before, in the month of June, the trade deficit was very high. The gap between imports and exports had widened to $6 billion. The government should have taken measures at that time, foreseeing the negative implications of this deficit. The finance ministry must be asked as to why they did not propose ideas and why have the higher-ups been lax when it comes to planning and forecasting. All that happened was that they left the boat, one by one. Presently, most of them are on different TV channels and are speaking against the economic policies of the government. As per Dr Ishfaq Hasan, ex Adviser at the Finance Ministry, the PM has never asked his economic advisory council for a plan, or asked those who ill advised him on IMF program–an odd statement by someone who was once in charge of initiating such processes.
It is strange that our forex reserves are at a record high, yet the value of currency is low. Add to that unprecedented inflation with a price hike that has reached 17.37% now. The worst gas load shedding is in the offing, as announced by the Minister of Energy, Hammad Azhar, in his address in the Parliament. It is good that he clarified all this, but why must the public suffer when it is the authorities that have not held up their end of the bargain.
The situation in our neighbouring Afghanistan has a direct impact on our economy as well. As per a UN report, the Afghan economy may compress further to 30 % and that may result in a famine and starvation. This fall out and human crises would be hard to control. Pakistan is still trying hard to convince the west, as well as UN, to unfreeze $14 billon of the country’s assets. Further delays would not only complicate issues related to the daily use of commodities in Pakistan, but the dollar and rupee balance would remain an issue as well.
Let’s join our hands and direct our country in the right direction for the betterment of our next generation. Differences in opinion are acceptable but on issues related to national security, national interests and public welfare, they are common. The political parties, whether in government or opposition, must sit together to find a better solution.
The writer is a freelance columnist.
It is strange that our forex reserves are at a record high, yet the value of currency is low.