LAHORE: The rupee is nosediving thanks to the condition set by the International Monetary Fund (IMF) as Pakistan needs to allow the market to determine the exchange rate. There can’t be any intervention to arrest the slide.
Hence, it is not a surprise that Pakistan saw its currency reaching a historic low in official exchange rate against the US dollar on Tuesday.
The trend has far-reaching consequences in the shape of expensive imports, further rise in inflation and cost of doing business, and higher food prices to say the least.
Unbridled free market and weaker currencies against the dollar is the corner of the IMF’s one size fits all solution – from Pakistan to Argentina and everyone in between. But it has always produced devastating consequences for the developing nations.
The IMF through the conditions attached with the latest $3 billion deal has it mandatory for Pakistan to keep the difference between interbank and open market dollar exchange rates not more than 1.25 per cent.
Hence, a combination of guaranteed weaker rupee and the monetary tightening [higher interest rate] as suggested by the world’s top lender has paralysed Pakistan’s economy.
So the slide in open market based upon demand is dragging the rupee down the slope as warned by those advocating a strong currency. They have been arguing inflation was triggered with the start of the process to weakening the rupee under the promise of boosting country’s export.
But the IMF conditions also include the energy sector – higher power and gas tariffs as well as jacking up the prices of petroleum prices.
With keeping these conditions in mind, no one can promise controlling inflation, raise in wages and boosting the economy with new employment to tackle the cost of living crisis, which has become a matter of sustaining for the overwhelming majority.
Courtesy: (Dunyanews)
