Loads of currency notes being printed and put in circulation by SBP, against the security of GoP's creditworthiness, would in normal circumstances be a legitimate exercise of SBP's functions, and no questions asked - but can the present state of the country's finances be called 'normal circumstances'?
And if not, what can be done to mitigate the ravages of galloping inflation and inexorable rise in prices that are fast turning the thin minority of those who could eke out some living wages for bare existence in the past, into the ranks of the hordes living on the brinks or below the 'poverty line', that already constitute more than half of the nation's population.
The days are not far-off when some less than 0.2% of the people (the elite, the privileged and the super-rich) will own and control everything, leaving the other 99.8% to scrounge for their left-overs. How can such a scenario be averted? Certainly no way if the present lot of the powers-that-be continue to act as they have done thus far.
Looking at it another way, what is the purchasing power of the rupee, and where is it heading? You can assess the purchasing power in relative terms, like how much a rupee could buy, say in 1971, of some simple thing like a loaf of bread, or eggs, and how many rupees would you need to buy the same quantity today (forget about quality)?
Or going to PPP (Purchasing Power Parity) or exchange rate for some foreign currency like US dollar, pound sterling, Swiss franc or Japanese yen, what is the ratio now and what it was then? How far have we travelled during the four decades since the break-away of the eastern wing (now Bangladesh)? How have our neighbours fared during the same period?
Asking these questions, put to an economist or a financial wizard would bring forth a torrent of statistics, based mostly on mythological figures of GDP, CPI, SPI, percentages of this, that and the other, without tackling the real issue, which concerns an average citizen - how to make two ends meet? Life is a constant struggle of uneven forces, where the weak and the downtrodden can never hope to score.
So back to the question - what is the money in circulation worth? And the answer, for most of us, is invariably - nothing! It doesn't stay in our pockets long enough to account for anything. It has invisible wings to make it fly to oblivion, leaving all of us (nearly all, except the privileged class) lost in nostalgia for the good old days when the rupee was worth something and did last (not evaporate immediately)!
Coming to specifics, the Pak rupee has moved against US dollar in a wide-range (from Rs 3.50 to a dollar in 1947 to around Rs 86 - now), but always in a single direction - even when US dollar fell in relation to other currencies. Marginal movements on a daily basis on exchange dealers' counters are negligible. More or less same is true vis-à-vis other currencies.
This constant downward slide in rupee value is not matched in neighbouring countries where the rupee was once the common currency or at par with the local one. I mean areas like India, Sri Lanka, Bangladesh, Burma, or territories (or British protectorates) like Mauritius, UAE (then called Trucial states), Muscat, etc. Why has our journey been slacker or more hazardous than others?
The usual refrain of corruption, frittering away of resources, nepotism, inept leadership, bad governance, lack of foresight, opportunism and the rest - like trouble on borders, terrorism, defence and debt burden - all had their part to play in the general malaise, but one item sticks out like a sore thumb, that has retarded our progress towards general welfare and prosperity for the masses.
And that is the very high rate of interest (euphemistically called the 'mark-up') and the ever-widening 'spread' between interest on depositors' savings, and the rate charged to domestic borrowers (public or private sector). This high rate of interest on borrowings depletes the margin of savings, fuels inflation and erodes productivity.
If we look at the interest rates of major currencies around the world (from near zero to around 5 percent) and compare it with the prevailing bank rates in Pakistan, we can see why prices of every thing keep escalating and incomes diminishing, and how we are being crowded out of world markets, adding to the misery. With the debt burden (internal and external) now exceeding Rs 9trn, and revenues shrinking, our future generations are doomed to even a worse fate than ours, and that is a frightening thought.
Hyper-inflation - worse than anything imaginable - brings to mind the conditions in Kuomintang regime in China (before Communist take-over). Legend has it that a person wishing to buy a single egg, had to hire a porter to lug the bundle of currency notes to pay for the egg! Maybe an exaggeration, but very near the truth. Are we heading in that direction, God forbid?
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