BUNER:
Even though some economists favour a fixed exchange rate system, in Pakistan’s case, it poses a dilemma because the fixation of the rupee value on the dollar has many repercussions on Pakistan’s economy. For instance, it will reduce export and encourage imports. This will further augment the current account deficit. Like his previous tenure, the incumbent finance minister, Ishaq Dar, has once again intervened in the financial market and fixed the exchange rate of the rupee to the dollar at Rs224.
Former finance minister, Miftah Ismail said fixing the rupee value against the dollar is not a sane policy because our imports are higher than export and will further expand the gap. He criticised the fixed exchange policy claiming that Dar has stretched the period of people’s suffering instead of shortening it. Fixing the exchange rate will harm the economy in the long run. On the contrary, if the market determines the rupee’s value to the dollar, it will only have a short-term effect as the economy can grow after tackling inflation.
However, due to the fixed exchange rate policy, three to four rates of interchanging dollar and rupee are running in Pakistan. It has discouraged the formal way of sending remittances and encouraged black marketing. Considering the economic situation in the country, the finance minister should revisit his policy of intervention in the financial market and let the market decide and determine the value of the rupee against the dollar. Also, the finance ministry should take pragmatic measures to discourage black marketing and the hoarding of dollars.
Published in The Express Tribune, December 19th, 2022.
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