In a positive development, the exchange rate of Pakistan rupee strengthened by 32 paisas against the US dollar in the interbank trading and closed at Rs153.33. The rupee is strengthening in the wake of excessive inflow of foreign currency from global sources. Remittances are relentless lovers of the rupee.
The rise of the rupee during March has cheered up the politically challenged PTI government. However, since the rupee’s rise is primarily due to remittances, the ruling PTI is presenting it as proof of the unwavering confidence of the overseas Pakistanis in the leadership of Prime Minister Imran Khan.
One year ago, at the end of March 2020, the rupee had traded at 166.70 to a dollar in the interbank market. Three-months later, price of the dollar was Rs168.83. Now at the end of March this year, the rupee closed at 152.76 to a dollar in the interbank market. Things have really changed.
Meanwhile, Bloomberg has termed Pakistani Rupee as the world’s best-performing currency as it appreciated the most against US dollar in the past three months. Besides, additional inflows from the Pakistani expatriates through Roshan Digital Account (RDA) into different assets like saving certificates, property and stock markets also kept the rupee hovering high.
The rise in the price of US dollar also led to an increase in inflation and the prices of imported goods have multiplied. The devaluation of the rupee badly affects the common man. The decline in the current account deficit to just $881m in July-Feb 2020-21 is undoubtedly the biggest reason behind the rupee’s gains. However, this decline was entirely because of the rise in remittances alone.
As the rupee’s ascent and ongoing economic recovery are set to increase the import bills of both goods and services, pushing up merchandise and services’ exports is absolutely necessary. Otherwise, the current account deficit may start rising again, halting the rupee’s rise.
The strengthening of Pakistani rupee is a welcoming development, but the incumbent government should take advantage of this. Prime Minister Imran Khan and his economic team should address the issue of inflation on a priority basis and the prices of daily necessities including flour, ghee, pulses, rice, sugar and cooking oil should be significantly reduced for providing relief to the poor.
