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SHARP DECLINE IN PAKISTANI RUPEE


SUDDEN AND SHARP DROP IN PAKISTANI RUPEE

By Masooma Amjad Khokhar

 

 

Now Pakistan's currency has taken a sudden and sharp drop marking its worst plunge in nearly a decade. The Pakistani rupee felt more fell more than three percent in this month of July alone and this rupee has lost 18 percent of its value since December 21 on closing the day at 108 against the US dollar the International Monetary Fund highlighted last year that the currency may be overvalued by as much as 20% the sharp drop is expected to push up prices and inflation. The Pakistani rupee slumped to record lows against the dollar on July 19 as domestic political and economic factors weigh on the currency. The rupee first fell to 224 against the U.S. currency on the interbank market during the day, after closing on July 18 at 215.2. Now the Pakistani rupee 7.6 per cent tumble to Rs228 to the dollar marked the latest setback for the currency, which has fallen sharply this year. The currency was not really depreciated for the past three years this is just 1 percent on average depreciation a year where you see the regional peers that the position are much higher than that so it was helping and hint on our export competitiveness and imports for the coming cheaper and last we were going at a higher pace demand is upbeat so the current account took a plunge in the last water its highest. Since the crisis in 2009 PML-N government has this great affinity with stable exchange rate when you go a bit difficult time politically you tend to take those decision but you know under the cover of those political chaos if you see the trend of inflation and then exchange rate depreciation we would see a very high correlation about 0.75 percent which is very high and so this would bring imported inflation home and that would be skates into other parts.


I don't think if you and I get a depreciation of three percent at this point it would add a manipulation maybe next year which is targeted at 6% may hit about 7% but if that goes much like up to 7, 8 or 10 percent something like that then we can predict that prices will go up quite quickly and that would imply some slowdown in the growth and a little bit of you know super suppressed amount and interest rate would be going below as income and credit wouldn’t get increased. So that's not a great equation. 

Keeping that rupee in a mind coming next few weeks or wait for another few months you will see how it will give great impact on the exports. I think economy is a great place where the demographic dividends are there and the middle classes are there to beat this current potential. So many gaps in the consumption which are being felt and they're required to the feed that poor investors. Time to think wisely and I think it's a right time to enter into the market. Dear friends of Masoomakhokhar.blogspot.com and don’t worry, we’ll talk much more about current affairs in the future. And as always, I’ll see you in the next blog.

 

 

 


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