Currency Woes | Editorial

The financial markets rang in the completion of the first 100-days of the PTI government in their own way. Resulting in a five-percent-fall of an already weakened rupee; thereby plunging it to an all-time low. Indeed, this latest fluctuation represents the sixth devaluation over the last 12 months. And now there is renewed attention of how this is the worst performing currency in all of Asia. That it has not managed to revise this position at all since the summer is for many a matter of grave concern. At the close of Friday, the rupee was pegged at 143 to the dollar.
Yet not everyone is worried. Least of all the Centre. Prime Minister Imran Khan has sought to assure everyone that this is simply an ordinary ricochet effect of increased pressure on the US dollar. Rather, he suggested, that the focus should instead turn to the recent Sino-Pak joint venture that will see that the establishment of the first-ever manufacturing car plant in the country; as indication of transforming Pakistan into an easier place in which to do business. And while this will dent the re-sale value of used cars — it, nevertheless, remains a welcome move. For the country will no longer be limited to an assembling base. This is to say nothing of the introduction of more skilled workers into the labour force. The ongoing trade war between Beijing and Washington notwithstanding.
Truth be told, the top PTI leadership may be right. After all, Finance Minister Asad Umar finally came clean about the government’s seemingly lackadaisical approach to sealing the deal with the IMF. Pakistan will be able to withstand a two-month delay on any final bailout package. Though given that the country is seeking anywhere between $6-12 billion from the Fund — it would be better to get this finalised sooner rather than later. That being said, the receipt earlier this month of $1bn (of a total of $3bn) from Saudi Arabia will likely have eased the pressure; at least in the interim. Ditto when it comes to recent projections from the US Treasury Department confirming that Islamabad will be in a position to repay the IMF before its Chinese debts mature.
Yet pundits point to the urgent need for a strategy that puts pen to paper; offering a blueprint of sorts for the way ahead. After all, forex reserves have suffered a drop of around 40 percent. This is to say nothing of the $18.5bn-current account deficit. Or the fact that both the IMF and World Bank have forecast economic growth for this financial year reaching no more than 4-4.5 percent as compared to 5.8 percent for FY2017. Though given that the latter represented the country’s fastest growth rate in some 13 years a slump is now to be expected.
Be all this as it may, the clock is ticking. The Fund’s executive board is scheduled to meet next month. By which time the political set-up must come up with a concrete game plan. For this will be the only measure capable of restoring confidence to the markets. *
Published in Daily Times, December 2nd 2018.

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