@
Lil Mathew, now you are going on another tangent. The growth rate won't jump to high in just one year but it is going to be a healthy 4-4.5%. You are repeating the same thing about export going down without hard stats, let's wait till the end of the final quarter and the stats will come in, otherwise it's all conjectures and hypothesis.
Again the most important thing is not a snapshot of a given moment but the trend. If the trend is in the positive direction then it means things are improving.
An another independent analysis from a non govt official..
The rise of the rupee: A politically potent
economical stupidity
By Asif H Sheikh Published: March 30, 2014
Would the rise in the rupee make our debt
payments easier?
Last week I received a call from a friend in
Karachi.
“What is going on with the dollar?! Should I
buy dollars? Why is it falling like this?”
My answer was simple.
“The dollar isn’t falling; it’s the rupee that
is rising.”
What’s the difference?
Difference is its implication.
Hailing from a regime that had made promises of
ending load shedding within 90 days of coming to
power, the fact that Finance Minister Ishaq Dar
made good on his December 2013 promise to
bring the dollar down to Rs98 deserves an
applause.
While those who consider the currency exchange
rate as something of a competitive sport where
appreciation of the rupee is something to
celebrate, then fantastic; Ishaq Dar should
continue doing whatever he has done. But those
of us who can appreciate the fact that fluctuation
in foreign exchange markets have economic
implications, a deeper analysis is needed.
To understand this better, let’s look at how the
rupee was made to rise in its relative value.
During his speech, the minister called on those
who have dollars in possession to quickly cash in
because he warned of losses when the rupee
would rise. This led to the speculative selling of
the dollar. The government further aided this
measure by bombarding the markets with the $
1.5 billion received as a ‘gift’ from Saudi Arabia.
The simple principle of supply-demand prevailed
and the dollar dropped.
This was further abetted by the fact that major
debt payments for March 2014 had already been
made. Speculations of the US releasing Coalition
Support Funds and the release of funds from the
Asian Development Bank as well as the World
Bank caused the rupee to rally further in the
market.
Now you may ask, what’s the problem?
Wouldn’t the rise in the rupee make our debt
payments easier?
Wouldn’t it even make our fuel cheaper?
The problem is that the way that the rupee was
artificially made to appreciate is not sustainable.
Gifts, known in economics as unilateral transfers,
are windfall profits as they are not a continuous
stream and therefore their impacts are likely to be
a one-off event. If the government had actually
not allowed the funds to come into the Pakistani
foreign exchange market and instead used it to
buy foreign bonds, they could have been a steady
income earning source as well as security for the
treasury.
The drawback of what the government did is that
without further funds coming in, if they push up
the rupee, speculators and traders will do what
they do best and start betting against the rupee
and cause it to depreciate in a relatively short
span of time.
Black markets have already started doing this.
Just a few days ago, some currency exchanges in
Karachi and Lahore were demanding Rs104 per
dollar.
The reason for this is that rise of the rupee was
indeed artificial for political gains. None of the
economic indicators needed to organically
appreciate a currency have changed in Pakistan.
In fact,
the rapid fluctuations in the currency are
detrimental to inviting foreign investments in the
country. It’s a sign of instability.
Yes the depreciation of dollar would mean the
immediate lowering of our import bill, which
would mean cheaper petrol at the pumps. But
Keynesian economics teaches us that in the
short-term, prices are ‘sticky’, meaning that for
an event such as a sudden rise in rupees value to
have an impact on prices it has to be a
maintained over a long run. On the contrary,
artificially depreciated rupee makes Pakistan’s
immediate imports more expensive giving rise to
domestic inflation.
The economic issues being faced in Pakistan are
multifaceted and there is a dire need for the
government to shore up the fundamentals.
Policies that boost exports and encourage foreign
direct investment are the ones that will create the
jobs so badly needed. Short term measures like
intervening in the foreign exchange market and
youth loan schemes may look good on the
headlines but they do little to better the lives of
the masses.
For some inexplicable reason the mantra for
‘ trade not aid’ seems to be reserved for dealings
with the US and EU while the government is
perfectly content with charitable gifts from the
Saudi’s.
