In The Name of ALLAH The Almighty
DEVALUATION OF PAKISTANI RUPEE
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
Student of B.S HONORS Economics.
University of Karachi.