Unexpectedly and suddenly, the Pakistani rupee plunged 3.1 per cent in the opening hours of Foreign Exchange (Forex) trade on July 5, sparking a shortage of foreign currency in the market as dealers/traders prefer usually to hold rather than sell in such situations. By midday, it had risen to Rs108.50 (Dh3.79), before settling at Rs108.25 by close.
This was the largest single day drop in the last nine years in the value of the Pakistani rupee. Many economy observers must be wondering over the sudden and shocking decline in the rupee’s value. I, as Pakistan’s economy observer, believe that this surprising and intriguing fall might have been the result of a planned and concerted speculative attack on the Pakistani rupee by some people in Pakistan who have tons of money in order to make some quick bucks. Yes, Pakistan is having a huge current account balance, which is expected to reach $8 billion (Dh29.38 billion) by the end of the financial year – this current account deficit is a big challenge for the country’s economic managers, but Pakistan has sufficient Forex reserves to finance its current account deficit, which will start improving once the heavy machinery imported during the current financial year is installed and starts producing goods for the export market. The Pakistani rupee has been reasonably stable during the last four years since this government came into power and the stability of the currency has played a significant role in stabilising the country’s economy and putting it on a healthy growth path. I believe Pakistan’s economic fundamentals are strong and the future potentials of economic growth are very positive.
I think that the devaluation of Pakistan’s rupee that we saw is neither warranted nor justified and I hope it will recover soon and stay stable. I also believe that betting against the Pakistani rupee will not be beneficial to the speculators.
- The reader is a financial advisor based in Dubai.
