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  December 19, 2012


In The Name of ALLAH The Almighty


Respected Sir,

Currently dollar prices against Pakistan rupees continuously rising today buying price of dollar is 98.40 and selling is at 99.00 in open market. Pakistan from last few years facing a steep devaluation of its currency. But many of us unaware about its consequences on the entire economy of Pakistan. In current programmes we usually hear from our investors that they said devaluations is good fro our economy as exports increases and export earnings will rise in the future. they said it do not have as such any negative impact on the economy , but in real there were many other aspects one must have to consider one judging the entire economy. Mainly itís a disequilibrium in the country balance of payments which compel the country to devalue its currency.

Although its good from the point of view that import reduces people reduce the demand for luxurious goods but its negative impacts are more than its positive impacts. Pakistan is a developing country usually it exports primary products its facing continuous challenges in the competitive world market. By devaluation its else create inflation in the county because domestic producers try to export their products outside the world through which they can earn greater profit rather then selling their goods in home country. also lead to increase the debt burden as more rupees are offered for the dollars to pay back the previous loans.

Market for traditional exports is inelastic in nature therefore devaluation may thus given no boost to exports because Pakistan export small value added items and major export is based on export of raw materials. Industrialists faces losses because import prices of essential raw material are sky rocketing, as raw materials are needed for manufacturing so the cost of new industrial development raise unexpectedly too high. So in short there is not such a positive impact on export sector also.

In the end I must say that only devaluation of currency is not a solution of the problem. Devaluation of rupee is the devaluation of Pakistan labor and skills in the competitive world market and they might face severe challenges international market. government must focus on sound macroeconomic policies to achieve the balance of payment equilibrium and to establish the stability in the economy of Pakistan.

Thanking you,

Rafia Zubair
Student of B.S HONORS Economics.
University of Karachi.




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