Black Wednesday for Pakistani rupee
Famous American writer and humourist Mark Twain once said, “History never repeats itself, but it does often rhyme.”
However, the steepest rout for Pakistani rupee on Wednesday, January 25, carries many resemblances to the pound sterling crisis in the UK back on Wednesday, September 16, 1992, known in the history of financial markets as ‘Black Wednesday’.
The all-powerful Bank of England with all the resources at her disposal could not fight market forces to save the falling pound sterling and finally gave up.
Similarly, when Ishaq Dar replaced the outgoing finance minister Miftah Ismail, his insistence to bring the US dollar below the 200-rupee level through controlling the inter-bank rate did not go down well with the International Monetary Fund (IMF) and the business and financial community.
However, despite warnings from every quarter, he continued with his unorthodox policy, resulting in a decline in worker remittances, re-emergence of the illegal Hawala/ Hundi network, the development of the black market of dollars, and rise in inflation due to the disruption in supply chain as containers carrying imported goods snarled up at port.
The policy of curbing imports may work in short term but with many unintended consequences such as the rise in smuggling of goods from the porous western borders. Also, falling imports mean less revenue collection, which is a very big chunk that has to be recovered now through mini-budget to satisfy the IMF.
Pakistan needs dollars and curbing imports or import substitution will do more damage than good. The only way forward would be to increase exports in a sustainable manner while generating more opportunities for the youth entering the job market.
For Pakistan, business process outsourcing (BPO) offers a unique opportunity to bring much-needed dollars by exporting services and improve economic growth.
The country has a large pool of educated young population and BPO provides an opportunity for these workers to gain valuable experience and training in the global market while earning precious foreign exchange for the country.
Even local companies can reduce their operational costs using BPO and focus on their core activities. This will help them to compete more effectively in the global market and increase their exports.
Now that the government is back on the table with the IMF with a commitment to complete the review in an effort to avoid the imminent risk of default for the time being, it should focus parallelly on some medium- and long-term measures to increase exports and BPO could be one of the key avenues.
The government can invest in modernising and upgrading the country’s infrastructure, including electricity, internet, and transportation, and improve the existing educational and training programmes to enhance the skills and competitiveness of the local workforce. The government can create a supportive business environment for BPO companies by reducing red tape, simplifying regulations, and offering incentives for companies to set up operations in the country.
On the legislative front, the government can strengthen data security and privacy laws and regulations to ensure that sensitive information is protected. This will give companies greater confidence in outsourcing business processes to Pakistan.
Our embassies and trade missions abroad can also promote the BPO industry through targeted marketing and advertising campaigns, as well as participating in international trade shows and conferences to showcase the benefits of outsourcing to Pakistan.
Also, they can collaborate with foreign companies to identify specific business processes that can be outsourced to Pakistan, and establish partnerships to help companies get started. This will help build trust and create long-term relationships between companies and the government.
In conclusion, by taking these measures, Pakistan can create a more favourable environment for BPO companies, which will in turn increase the number of foreign companies outsourcing business processes to the country and help boost exports.
By working closely with the BPO industry and foreign companies, the government can help position Pakistan as a major player in the global BPO market while creating a more sustainable way to grow exports and reduce trade deficit.
The writer is a financial market enthusiast and is attached to Pakistan’s stocks, commodities and emerging technology
Published in The Express Tribune, February 6th, 2023.
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