The Pakistani rupee is starting to see better days after the Pakistan Tehreek-i-Insaaf (PTI) government depreciated the currency substantially, claiming that the previous value was being artificially maintained and was hence, affecting the market. As of Sunday, December 8, the Pakistani rupee climbed to five-month high as opposed to the dollar. The United States (US) dollar which was standing at Rs164 previously, now stands at Rs154.70. This is because the government has managed the current accounts deficit by bringing down the imports, and is also focused on increasing the foreign reserve due to the financial aid that the country is receiving. This has helped the rupee balance itself against the dollar in the open market.
This is good news for the local investor, who was uncertain about the market conditions and was prone to investing more in buying foreign currency instead of increasing reserves of the national rupee. This gradual appreciation of the rupee has stabilised the exchange rate, and investors who were previously buying dollars are now liquidating them to get the Pakistani rupee instead. This will definitely improve the position of the rupee further domestically, especially because a ban on imports significantly reduces the need for foreign currency amongst the business and investment sector.
“One of the biggest reasons is that the country has come out from a huge current account deficit of $20 billion in FY18 and now[in] October, [it] posted a surplus for the first time after four years,” explained Forex Association of Pakistan President Malik Bostan. This will take away the attraction for investment in the US dollar, as the appreciation of the currency will offer more stability in the exchange. It is also expected that the import bill will reduce further in the next fiscal year. With that agenda in mind, it is likely that the current trajectory will push through and help the Pakistani rupee stabilise in the open market. The devaluation upset a lot of stakeholders in the country, however, the market forces have now started setting the real exchange rate.
PTI’s plan for the economy is unusual, non-linear, full of experimentation, and very gradual. However, it is showing results on the economic front. If the government can also convert that into profits for the local industry and businesses, a huge chunk of the population aggravated by the current policies and in opposition to the radical changes in the system, might just shift support for the amateur political party.