Pakistani housewives and the economy: Converting rupees to dollars... for handbags

"Every year I buy myself a handbag and end up paying more PKR. So now I just convert my money into dollars earlier."

A couple of days ago I was confronted by an alarming fact. I was sitting with a group of housewives and was told that every month, 30% of those present, converted their pin money into US dollars every month. I was so surprised that I blurted,

“But why do you do that?”

One of the housewives replied very innocently,

“Well, every year when we go on holiday, I buy myself a handbag. Recently, I realised that the value of the dollar is going up and I end up paying more PKR for a handbag each year. So now I just convert my savings into US dollars each month.”

What upset me the most was that these women did not even realise, much less feel sorry for, the repercussions of their actions on the country’s economy.

It is pointless to get into the morality of whether ‘dollarisation’ is good or bad for the country. We have all read headlines on the front page of leading Pakistani newspapers, to the effect of,

“Move to stop citizens from taking over $3,000 abroad.”

“Forex reserves equivalent to less than one month payment.”

“Dollar traded at highest level of Rs 109.20.”

The simple fact is that money is a store of value and it is the government’s responsibility to ensure that the rupee continues to remain the medium of exchange by instituting and implementing the correct economic policies.

The value of the Pakistani rupee was 62.50 in February 2008. Since 2008 the Pakistani rupee has been on sale and its value has declined by a whopping 75% to date. In a country where a ‘sale’ is considered a reduction in prices by a measly 5% – 10%, I am surprised that there has not been more fuss over this particular matter. Considering that Pakistanis are quite adept at expressing their displeasure in public, I am surprised that no one has come out on the streets to strike, shut down markets, burn tyres or cars and set gas stations aflame.

Please don’t get me wrong, I do not support these actions. But it is surprising that we have not protested against such a massive decline in the most important economic indicator of a country – its currency value.

I am quite certain that the cynical government and bureaucratic hierarchies will say that converting PKR into US dollars for handbags does not have a significant impact on the value of the rupee, and to some extent they may be right. But every rupee counts and every dollar bought does, in fact, depreciate the value of that very rupee.

It is another debate altogether about why some people feel the need to spend such ostentatious amounts of money on designer goods that cost over Rs150, 000 each. Why they choose to display such flamboyant symbols of wealth in a country where 95% of the working population earns on average approximately Rs50,000 per year, is beyond me; keeping in mind that the working population in question uses this income to sustain an entire household, pay for rent, food, schooling and medical bills for their family members.

But it seems easy for democratic governments, who tell us ‘they are of the people, by the people and for the people’, that such extravagance is an exception to the rule. Does the cost of petrol not matter either? Perhaps the cost of edible oils, the one we use in our daily meals, does not have an impact on the economy either. Or maybe, if we start importing sugar and tea on a larger scale, that will surely help the value of the rupee rise.

We have all heard and understood that the cost of petrol has an impact, but the impact is as bad with the cost of edible oils, the cost of imported sugar, tea and even clothing. Similarly, at some level, the conversion of PKR for US dollars for handbags will have an impact. Moreover, it is usually a combination of factors, rather than a single factor, that affects the currency value of a country.

A government minister in the previous government went so far as to say,

“Sugar is a luxury and we should not use it without thought.”

Well, in Pakistan it seems that the rising cost of transportation will soon make onions, tomatoes and other vegetables a luxury. Indeed, very soon life itself will become a luxury since our very survival will become so expensive. As it is, the United Nations Food and Agriculture Organisation (FAO) recently estimated that over 24% of the population in Pakistan is severely under-nourished. But we can continue to live in the cocoon of comforts and designer goods that we have built for ourselves and let them eat cake!

It is no surprise, after all, that the housewives of Pakistan are converting rupees into dollars. Today they may be doing it for handbags tomorrow it will be for sugar and tea! The value of the rupee will keep declining and people will keep buying more and more dollars. The only difference is, soon enough, the costs will catch up with all of us, from all classes, and when that happens, the comfortable bubble we are living in is bound to burst.