9-months old Pakistan’s government, led by cricketer-turned-politician Imran Khan, has been avoiding the inevitable but it seems as if it is left with nearly no choice. Just four days into International Monetary Fund (IMF) bailout package, Pakistani Rupee saw record devaluation after dropping by 3.6% in a single day.
On Thursday, the rate of United States Dollar rose up to 148 against Pakistani Rupee in the open market, while the country’s central bank’s official figures posted rate of 146.52.
Pakistan has been facing economic problems of all sorts for quite some time now. Economic reforms and prosperity was among the most important agendas in Imran-led Pakistan Movement of Justice (Pakistan Tahreek E Insaf) manifesto, and the campaign resulted in the party winning just enough seats in parliamentary democracy to take over federal government as well as in two provinces.
However, tackling the drowning economy seems to be a trickier task than Mr. Khan had anticipated initially.
Changing key officials, such as the Finance Minister, Governor State Bank of Pakistan and members of the Economic Advisory Council also does not seem to help the cause.
In fact, the currency saw a depreciation of over 20% in the last 12 months, which led Bloomberg to term PKR as the worst performing currency in Asia.
While some experts disagree with the currency devaluation as the most important tool of gauging a country’s economy, there is no denying the fact that it surely has put a burden on the lower and middle class and the federal government of Pakistan seems to be clueless regarding policies to minimize these adverse impacts.
However, such rapid devaluation in currency of a strategically very important country did not come as a surprise to experts. It has been long argued that previous Pakistani governments intentionally kept the currency at an artificial level in order to win public sentiment and it was only a matter of time that market had to take the rein in its own hands.
Moreover, as per different reports, IMF has been very keen for Dollar to float on the actual demand-supply rate in the Pakistani market, the policy which, if adopted fully, may end up pushing Dollar well over 160 rate in the future.
With $6 billion IMF bailout, Pakistan has procured some breathing space but it may not be long before the country sees itself descending deeper into unbearable economic meltdown. Import-export balance, large-scale tax reforms and curbing financial corruption may be the only way forward.