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Yea but the exchange rate quoted here is rarely the actual traded rate.....for example Banks will charge a higher conversion rate on your credit card transactions abroad...and if you went to a forex dealer they'll give higher rates for USD/GBP etc.
I remember i had to buy some GBP in a hurry as i was travelling.....the actual rate was 169....but the dealer refused to offer that...instead i bought at 174 Rs to 1 GBP.
actually Pakistan is the only country in the world (or I know the only country) who offers actual rate very similar to exchange rate of the international market. That is to attract more foreign investors and encourage overseas Pakistanis to send as much money to Pakistan as possible.
I know it was not like that before and like any country in the world, there was significant difference between bank rate and private transaction but now the difference has been narrowed marginally that you get the rate very similar to exchange rate
oil prices hadn't dropped when ruppee dropped from ~108 to ~100. Nothing has been privatized (nothing significant atleast). The loan came only just now, some time back. All that happened was elections and people's hopes and speculations. Also, SBP DID actually intervene. Not much has actually changed. Then the government gets the loan, increasing reserves, that kept the rate low as most traders trade on foreign reserve conditions. The 1:100 exchange rate is not sustainable. It will have to fall.
I've found an old news piece about SBP intervention here:
SBP moves to salvage rupee - Newspaper - DAWN.COM
In Pakistan pegged system of foreign exchange rate. So when Pakistan observes that its exchange rate is falling beyond the caps and collors then state bank intervenes to stabilise it and this is a normal practice. Nothing wrong in it.
As far as your second point is concerned in which you described economical conditions after coming into government of nawaz Sharif, so I would only say the other factors were the increase of confidence of investors and foreign direct investment.
The nature of the intervention of SBP and Japanese was very different
One of the key elements for rupee stabilisation was the perception of the people and the fear factor aided by the government that people might incur heavy losses if they did not let go off dollar from the secret deposits. The inflow of USD and Euro made things easier for the government as previously these currencies used to be stocked like commodities in order to create artificial shortage of the currency and hence devaluing the PKR below threshold.
Basically the Government had less headache as compared to previous government and it is not a sin to say that the performance of the government was also slightly better than the last government so far. So they handled the matter bit more professional as compared to predecessors.
Having said that, I am hopeful we will be able to keep rupee around 100 for a longer period of time as the stability in local currency often means reliability for foreign investors and stability in the economy for longer run. Many foreign investors do not just invest for a simple fact that when they will invest in rupees and earn 20% after the closure of financial year, may be rupee lost it's value of 20% and that means their 20% profit will become zero if converted back to foreign investors local currency. So good news is coming from Pakistan and we must be happy that at least something is happening, if not anything
gdp is the sum of transactions in a country.
wat wrong did I say ?
yeah nothing wrong with it, if your'e in soviet russia or communist china or dictated north korea that it...
And nawaz is the same guy who hates dictatorships and at the same time directly dictates currency exchange rates.
And what do you mean by "stabilize" ? A rate at which YOU would like to buy dollar? or a rate at which a free market trades?
If it's the first one, then let me tell you the rate is not "stable" for the exporters right now.
Yes the nature was different. People normally see a lower currency value as a bad thing since their purchasing power goes down. But a lowered exchange rate boosts exports. Japan intervened to keep rates low, I don't remember during which events, whether it was during that tsunami or fukushima incident, but a sudden rise in remittances increases currency value which they had to lower artificially to keep exports going.
Pakistan on the other hand, intervened to RAISE currency value (very bad for exports especially since our exports are in highly price competitive environments) to give awam what they call a lollipop to suck on and then used this propaganda thing to scare people into selling dollars. And what does the economy get out of this? Bad exports, but happy "illiterate" awam (the bulk of voters). This is bad for business, good for politics.
May be you should check your posts and see how irrelevant of a post that was, just because you wanted to bash the current government due to your political love for others. Which really didn't serve a purpose to the nation of Pakistan AND you make yourself look.......you know what!
The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.
Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total.
The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports.
I think you missed the types of exchange rates but for your kind information, there are mainly 3 types of exchange rates namely,
1- fixed
2- floating
3- hybrid
And the last one has others, like
Crawling peg, wider band and fixed mixed.
So as far as your point is concerned, so u know Pakistan has pegging system in force. When state Bank feels that its currency value is depericiating rapidly so it intervenes by providing foreign reserves in market and by other traditional or non traditional means. This is right according to international practice.
Even if you say that America is following fully free float system then I can only say it is not even being followed by america.
So there is nothing wrong about it. For more information, read the brettonwood system and afterwards system of foreign exchange rates.
Where your second point is concerned then there I will disagree with u. Because when your currency falls so much then , no doubt, it increases exporters confidence and decrease importers, it also makes your exports internationally less competitive as buyers have to pay more price than to others nation goods.
And for a moment, we suppose that your argument is true then why developed countries do not depreciate their currency to boost exports.
I think this is about economics and if you really want a proof then go through brettonwood system. I am sure you will find your answers.
Sir multiple interventions and close monitoring was being done by finance ministry of Japan back in 2011/12. Several Japenese companies such as Panasonic was posting losses in billions before the finance ministry's intervention to devalue Yen in order to make it more competitive. It was such an easy step to control jobless rate and many companies came out of recession. I gave the example of Japan just for illustration purposes... There is no need to stick to the same topic I guessYes the nature was different. People normally see a lower currency value as a bad thing since their purchasing power goes down. But a lowered exchange rate boosts exports. Japan intervened to keep rates low, I don't remember during which events, whether it was during that tsunami or fukushima incident, but a sudden rise in remittances increases currency value which they had to lower artificially to keep exports going.
Well Pakistani rupee did not gain value, it just stabilised... and stability in any currency is always considered a very positive vibe for any nation. See even our exports only increased after the stabilisation of rupee... It did not decrease as you're giving the impression.Pakistan on the other hand, intervened to RAISE currency value (very bad for exports especially since our exports are in highly price competitive environments) to give awam what they call a lollipop to suck on and then used this propaganda thing to scare people into selling dollars. And what does the economy get out of this? Bad exports, but happy "illiterate" awam (the bulk of voters). This is bad for business, good for politics.
Sir multiple interventions and close monitoring was being done by finance ministry of Japan back in 2011/12. Several Japenese companies such as Panasonic was posting losses in billions before the finance ministry's intervention to devalue Yen in order to make it more competitive. It was such an easy step to control jobless rate and many companies came out of recession. I gave the example of Japan just for illustration purposes... There is no need to stick to the same topic I guess
Well Pakistani rupee did not gain value, it just stabilised... and stability in any currency is always considered a very positive vibe for any nation. See even our exports only increased after the stabilisation of rupee... It did not decrease as you're giving the impression.
Japanese Yen fell from 150 to only 70 rupees against USD.. and now it recovered back to 120... So despite Japenese Yen gaining 50% of value, Japan did not collapse as you might presume
My point is, even if civilized countries interfere, they interfere to HELP BUSINESSES ! In Pakistan interventions are always aimed at lowering dollar value to provide "relief" to awam. Developed countries who still intervene time to time do it to help their economy. Pakistan does it for political reasons, uses it as a lollipop. That's the difference.
My friend, I trade dollar on daily basis and follow Forex news on hourly basis so let me tell you something.Pakistani ruppee gained value last sept. when dollar went from ~110 to about 105 and then fell more. That was because of SBP's injection of dollars into the market. That was the triggering event, SBP's selling of dollars in open market.
Export gains did not exceed expectations. Right now, exports are being hurt, you might see this in the figures for the next few quarters.
Buddy there's a third way as well. Most (or all?) countries use a combination of all three methods for better estimate, reduced error.
the third one is called the output/production/value-added method...
All of this is done using ruppees as that is the currency used in the economy. We could get a decent figure in ruppees for GDP. But converting that to USD is nonsense and does not represent accurately the actual GDP or condition of the economy due to the fact that the current exchange rate is controlled by the government.
That was my point in that post, I don't know what you got from it...
I don't know what you're talking about, the bretton woods system failed badly. Since then most of the civilized world has freely floating exchange rates. and those who intervene rarely do so.
So what was your point........? when your facts are clearly wrong.
That makes no sense. Go read a book on macro-economics buddy. that will clear the misconception. And btw, developing countries do devalue their currency if they can depending on the politics(devalued currency is generally seen by the public as a bad thing, but it's actually a good thing for the exports if the exports are price-elastic).
Developed countries don't do that because they like the free-market. Plus it lowers khapp level for the governments/central banks, they don't have to continuously monitor the rates and keep interfering, the market goes where it wants to go. And that's how it should be to be fair to everyone. They just have this understanding between them.
China is a major example and it's artificially lowered currency value has been criticized heavily by the west.