Rupee forecast

Given the bleak IMF forecast, govt must now consider how to turn things around and prove that IMF has got things wrong


Editorial July 25, 2014

Pakistan’s financial policymakers will not be happy with the latest IMF view that the Pakistani rupee is overvalued. There had been a degree of pride in the country that parity had been brought to Rs98.72, below the Rs100 mark where it had hovered for a very long time.

For the current fiscal year, the IMF has projected the rupee-dollar parity at Rs113.7. This implies a depreciation of some 13 per cent for the Pakistani rupee against the greenback. In other words, while not saying so in open terms, the international finance body sees the rupee as significantly weaker than is currently put forward by the State Bank of Pakistan. It also sees a further downturn for the rupee in the future. The projections are based essentially on the size of Pakistan’s economy and the current account deficit.

The news is obviously not good for Pakistan’s struggling economy. If the IMF projections are correct this would adversely impact trade and other factors. Perhaps most crucial of all, beyond all the jargon and the play with figures, is the evidence that Pakistan’s economy has not made progress and that the rupee continues to lose strength against the dollar. This will clearly have an impact on business confidence as well as perceptions regarding Pakistan. Though the IMF rating is being questioned, it clearly has an impact: such projections by a giant entity will not go ignored. A sinking economy does not, of course, augur well for the people in times when joblessness is already high and inflation continues to rise, making lives tougher. The PML-N government had promised an economic turnaround as one of its key electoral pledges. Given the bleak IMF forecast, it must now consider how to turn things around and prove, as some analysts are already saying, that the IMF has got things wrong. For the sake of our country we can only hope they are right, given that a resurrection of a flagging economy is a key priority if our nation is to move forward towards a brighter future with a better quality of life for its people.

Published in The Express Tribune, July 26th, 2014.

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COMMENTS (1)

Qadar Ali | 7 years ago | Reply

Current government has created false hope but reality hits hard every time.

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