Pakistani rupee’s fall was bound to happen

Dubai: The sudden plunge of the Pakistani rupee, the steepest since 2013, and its partial recovery on Thursday morning have been in the offing, according to some Pakistani expatriates.

The rupee went down by 3.1 per cent to 108.095 per dollar at close of trading on Wednesday, making it the lowest level since December 2013.

On Thursday, the Pakistan government said the weakness in the currency is “artificial”.

But the fall was to be expected, some expatriates told Gulf News.

“The move [devaluation] may help the nation curb a rising deficit and boost falling exports,” Ahmad Shaikhani, president of the Pakistan Business Council, told Gulf News. “The nation’s trade gap has increased about 60 per cent to $3.5 billion (Dh12.8 billion) as of May compared with the same period last year,” he said.

“The devaluation may also help overseas Pakistanis to send more money to their home country but simultaneously, it will affect the inflation on the local market which restricts the purchasing power of the individual.”

Mohammad Nafees, a Pakistani chartered accountant, said the negative factors were already present and it was well known that the economy was not performing well until political uncertainty triggered the currency’s weakening.

“There are several factors for this,” Nafees said. “First, the Pakistani exports have been continuously falling for the last one year. Second, remittances by Pakistanis overseas are also falling due to the conditions in the Middle East and the drop in revenue in oil-producing countries,” he said.

“The main factor which has triggered this fall was the reaction of [Pakistan’s] Finance Minister, Ishaq Dar, after he appeared before the Joint Investigation Team (JIT), which is looking into the financial affairs of [Pakistan’s] prime minister and his family. The minister made some absurd comments about the opposition leader which led people to believe that there was something amiss.

“Whenever there is a political uncertainty in a country, the currency suffers due to it,” said Nafees.

Hassan Haroon, UBL senior vice-president, however, differed with the view that the current political uncertainty is the reason behind the rupee’s fall.

“I think it’s a fundamental issue, a structural issue. Personally, I don’t think it has anything to do with [political uncertainty] because this should have happened earlier. This is happening now, so I think the underlying factor is the balance of payment deficits,” Haroon said.

“What Pakistan needs to do is to work on their exports and unless they are able to bring the exports up, they will always have this issue,” he added. “Pakistan has been running a balance of payment deficit for a while. So the import bill had increased tremendously and the exports continue to lag behind.”

However, the fall in the currency’s value on Thursday turned into a windfall for Pakistani expats, said Sudhesh Giriyan, COO, Xpress Money.

“From the 160 countries Xpress Money operates in, the overall feedback has been positive about the rupee’s fall with an expected rise in the number of customers remitting money to Pakistan today and over the weekend,” said Giriyan.

But these gains are only for the short term, Nafees said, as inflation will eventually catch up.

“Those who are remitting money, this is a good development. They will get 3.1 per cent more for the rupee when they send their money to Pakistan, but it will be offset by inflation in Pakistan. For the short term, they will benefit, but in the long term, they will lose because the prices will adjust again accordingly.”