IN what appear to be positive psychological effect, the Rupee made a slight gain in the inter-bank market and a larger recovery in the open market after the July 25 general election. According to market sources, the situation has improved due to pouring of extra foreign exchange by China on top of China-Pakistan Economic Corridor (CPEC).
Unbridled nose-dive of Rupee has led to sharp increase in inflation as prices of almost all goods and services have gone up, creating immense difficulties for fixed-income groups. The damage has been done but no one knows for sure for how long the recovery of Rupee against dollar would be sustained in the prevailing situation. Moody’s, one of the top three global credit rating agencies, warns in its post-election note on Pakistan that ‘heightened external vulnerability’ is a main challenge for the new government. ‘Possible policy options would include monetary and fiscal policy tightening, further exchange rate depreciation and turning to the IMF for external financing,’ it opines. It clearly projects that the exchange rate might depreciate further which means the current appreciation is temporary. The fiscal situation is so tight that the would-be Finance Minister Asad Omer has remarked that all options are there including IMF bailout package to salvage the situation.
A report in The Financial Times claimed that Pakistan was eyeing to seek one of the biggest bailout packages in its history from IMF. It claims the country was to seek $10 to 12 billion from the Fund. It is unfortunate that Finance Ministers of successive governments had been claiming that the package negotiated by them would be the last one from IMF and that there would be no need to go to the Fund again but at the end of the day circumstances forced us to knock at the IMF door again. It clearly shows that neither our approach is working nor the IMF formulas are ever going to cure economic and financial malaises of the country despite implementation of so-called corrective and bitter measures agreed with the Fund. Would PTI government prove to be different?
Source:Â https://pakobserver.net/rupee-recovers/
