Pakistan should not worry about currency devaluation’

[Shahzaz ud din]

Pakistan should not worry about currency devaluation’
By APP
Published: September 21, 2019
TWEET EMAIL
PHOTO: CREATIVE COMMONS/FILE

ISLAMABAD: Pakistan can enhance its economic growth by following the Japanese model, norms, and culture of education and development, said Embassy of Japan Deputy Mission Chief Yusuke Shindo.

While delivering a lecture at the Gateway Institute of Superior Services he said that Pakistan was transforming from a stabilisation period and therefore the government should not worry about the devaluation of the rupee.

“Even though Pakistan’s debt has increased due to devaluation, the government should focus on development as only a higher and more stable economic growth can help Pakistan improve its exchange rate,” he added.
Sharing the Japanese experience, he said that in 1971, the Japanese exchange rate was very high against the dollar which was 360 Japanese Yen (JPY) per dollar.

“After gaining momentum due to high growth rate, the exchange rate gradually improved, and today it is around 110 JPY per dollar,” Yusuke added.

He said that in the 1960s when Japan took a loan from the World Bank the exchange rate was very high, however, when it repaid the loan the exchange rate reduced by 40%, which meant that Japan had to repay 40% less amount.

Similarly, he said that although Pakistan’s debt had increased due to devaluation the government should focus on its development as only higher and stable economic growth could help in improving the exchange rate.

Published in The Express Tribune, September 21st, 2019.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.


Read more: Business , Currency devaluation , Japan

 

[Haris Ali2140]

For most Pakistanis currency is like d**k.

 

[Yaseen1]

we should learn from japan and also invite japan companies for investment and training of our public,japan products are also of very great quality

 

[Morpheus]

we should learn from japan and also invite japan companies for investment and training of our public,japan products are also of very great quality

https://www.radio.gov.pk/19-09-2019...-of-japan-for-investment-of-rs51b-in-pakistan


Pakistan adopts investment-friendly policy to attract FDI

September 19, 2019

President Dr. Arif Alvi has said that Pakistan has adopted a very liberal and investment-friendly policy, which is free from restrictions on remitting capital, profits and dividends.

Talking to President, Morinaga Milk Industry Co. Limited, Japan, Michio Miyahara, at the Aiwan-e-Sadr, Islamabad on Thursday, he appreciated Morinaga Japan for its investment of 5.1 rupees billion by setting up a manufacturing facility in collaboration ICI Pakistan to meet the nutritional needs of local as well as regional markets.


The President said this investment would help in diversifying Japanese Investment and would encourage other Japanese Companies to invest in Pakistan. He underlined that the Investment Policy of Pakistan had been designed to provide a comprehensive framework for creating conducive business environment for the attraction of Foreign Direct Investment.

The President highlighted that in order to ensure favorable business climate for investors, Ease of Doing Business Reforms are also underway.

 

[jupiter2007]

I told you one years ago that rupee value will go around 165 and should start improving after that.

we should learn from japan and also invite japan companies for investment and training of our public,japan products are also of very great quality

We first need to bring our country in order.
Law making is important...we need proper laws to protect the investment of foreign companies.

 

[PakSword]

While devaluation increases the loan amount in local currency terms, it makes imports expensive and exports cheaper. There are a few things a government must control:

1 - Some finished products depend on imported raw materials. Export of these products do not carry many benefits of devaluation because they become expensive due to the effects of increase in the prices of raw materials. In local market as well, the price of these products increase. A good example is car industry. Prices of cars go up because many parts are imported rather than manufactured in a country like Pakistan.

2 - Prices of products that are locally manufactured with mostly locally produced raw materials (such as textiles and food products in case of Pakistan) also go up due to no oversight by government (price control). While a little increase is justified because in the end, a textile owner wants to purchase a car, or a milk producer also wants to go abroad for tourism with his family. But unjustified increase is where government has to keep a check on. Recently, milk price in Pakistan shot up from Rs 94 to 140 per litres in some areas. This was totally unjustified and shows lack of government control on the prices.

3 - Devaluation decreases the imports but government loses revenue (earned through import duties and taxes).

4 - Local industry is setup to produce raw materials which become expensive due to devaluation. However, if a country fails to produce raw materials locally, one of the objective of boosting industrialization is not achieved and the existing industry that depend on those imported materials starts looking for shifting their industry to countries where they think they will become competitive in international market.

There are many other things to consider and a good finance minister and his/ her team manages devaluation keeping all costs and benefits in sight.

The effects of devaluation can be seen in medium to long term. Lets see how the current government has managed to balance out the pros and cons in 2-3 years.

 

[AZADPAKISTAN2009]

Pakistan produces limited about of Goods eatable items (Consumables)

if our currency is strong we can get more money selling less, the surplus food would be used to feed our own population

If currency is weak , 80-90% of our food will be bought by foreigners and local population will be eating grass


80% of Food grown , Milk Produced , Honey Produced , Fish captured , Meat Products should be used by Pakistan and 20% should be sold to International Market


When a country devalues their currency , their food storages are rampaged and food is exported out leaving storages empty for local consumption


We need to raise living standard back to 1965 levels !!!

 

[ziaulislam]

For most Pakistanis currency is like d**k.

Currency value dosnt matter..its accuracy matter..its a mean of transaction and has to be accurate

Your debt to be honest Doesnt really increases with devaluation in real terms

A overalue hurts the country ..an undervalue hurts the working class...

 

[Syed1.]

For most Pakistanis currency is like d**k.

Well said....

1 USD = 1200 South Korean Won
1 USD = 108 Japanese Yen

 

[Haris Ali2140]

Well said....

1 USD = 1200 South Korean Won
1 USD = 108 Japanese Yen

When I came to know about the value of Japanese yen a few years ago I was baffled that how a country so developed can have a so low currency value.By then I also fell with the majority of public of Pakistan.

 

[Asad200]

The country with more exports than imports, ya they need lower value of currency as much possible, but for a country that imports every life saving drug, auto part, even basic electronics, yes devalue of currency is a huge loss.

We can't follow Japanese model. Our conditions are totally different. Our people don't work like them. We mainly want to depend on imports.

 

[Haris Ali2140]

The country with more exports than imports, ya they need lower value of currency as much possible, but for a country that imports every life saving drug, auto part, even basic electronics, yes devalue of currency is a huge loss.

We can't follow Japanese model. Our conditions are totally different. Our people don't work like them. We mainly want to depend on imports.

We have to start at some point. Otherwise we will be in a loop.

 

[Asad200]

We have to start at some point. Otherwise we will be in a loop.

Govt initiates it. In Japan also it was govt which after ww2 initiated special training and learning programs.
Japan was far behind us in 1947 and we are far behind today and our govt has no interests in training programs. Our education is ratta system, a babu producing private school factories can't produce intellectuals.
We have to change the system. You and me can't do that. It's the govt level step.

 

[ziaulislam]

When I came to know about the value of Japanese yen a few years ago I was baffled that how a country so developed can have a so low currency value.By then I also fell with the majority of public of Pakistan.

japanese frequently devalued their currency in 1960-90s to get better exports
same is being done by chinese(hence called currency manipulators)

but in all honesty currency should be accurate...that is what is important

 

[Nilgiri]

While devaluation increases the loan amount in local currency terms, it makes imports expensive and exports cheaper. There are a few things a government must control:

1 - Some finished products depend on imported raw materials. Export of these products do not carry many benefits of devaluation because they become expensive due to the effects of increase in the prices of raw materials. In local market as well, the price of these products increase. A good example is car industry. Prices of cars go up because many parts are imported rather than manufactured in a country like Pakistan.

2 - Prices of products that are locally manufactured with mostly locally produced raw materials (such as textiles and food products in case of Pakistan) also go up due to no oversight by government (price control). While a little increase is justified because in the end, a textile owner wants to purchase a car, or a milk producer also wants to go abroad for tourism with his family. But unjustified increase is where government has to keep a check on. Recently, milk price in Pakistan shot up from Rs 94 to 140 per litres in some areas. This was totally unjustified and shows lack of government control on the prices.

3 - Devaluation decreases the imports but government loses revenue (earned through import duties and taxes).

4 - Local industry is setup to produce raw materials which become expensive due to devaluation. However, if a country fails to produce raw materials locally, one of the objective of boosting industrialization is not achieved and the existing industry that depend on those imported materials starts looking for shifting their industry to countries where they think they will become competitive in international market.

There are many other things to consider and a good finance minister and his/ her team manages devaluation keeping all costs and benefits in sight.

The effects of devaluation can be seen in medium to long term. Lets see how the current government has managed to balance out the pros and cons in 2-3 years.

Hey, when did you become a Think Tank? Congrats