Fitch Solutions Co. was as quoted by Bloomberg as saying that the PKR would drop as low as 350 by the end of 2024. Two other prominent names share the same opinion, targeting between Rs 320-330.
Even so, there is pressure on payments because of a number of circumstances that are too stressful. These unclear assertions with minimal supporting data undermine economic advancement in several ways in addition to harming goodwill.
It is well known that Pakistan struggled to arrange funds and negotiate with the IMF (International Monetary Fund) during a period of economic hardship brought on by geopolitical circumstances and local concerns. This was one of the major causes of pressure on the Pakistani Rupee that also led to the decline in State Bank of Pakistan’s (SBP’s) foreign exchange reserves.
SBP foreign exchange reserves of $8 billion to 1 billion is the benchmark level.
The current account position, deficit, remittances, profit repatriation, debt payments, inflation, and the final balance of payments position are some other factors that affect PKR movements.
Looking ahead, the general election is going to be held February 8 next year. It is anticipated that as soon as political stability returns, efforts will be made to simultaneously accelerate economic recovery and implement structural reforms in diverse areas.
Above all, Pakistan will need to secure cash by rolling over its debt and secure new finance to plug the shortfall.
Much will depend on how it fills the gap and where it is in relation to its balance of payments (BoP) position.
Trade will be crucial. But all eyes should be on oil prices because this commodity always acts as a spoiler, and is certainly the cause of turmoil throughout the world. Let’s hope it doesn’t happen again.
Nature has a significant role to play as well—one that shouldn’t be harmful.
More significantly, though, SBP’s role has been extremely beneficial due to its effective role/regulations that have promoted remittance through the proper channels. SBP has another important task to manage derivatives. It surged to USD 8 billion in FY 2019. It has successfully brought it down to under $ 3 billion.
Every business experiences highs and lows. Even a 10% to 15% variation in transactions can alter the course of the game if they are substantial, with millions of transactions.
To boost and attract in remittances, every effort should be made. Pakistan’s central bank is now working harder to boost inflows. The largest factor that has greatly aided in the economy’s recovery is workers’ remittances.
Before issuing such reports or outcomes, it is expected of all subject specialists/authors to provide comprehensive data, along with the reasoning and detailed information. Otherwise, one-sided stories are never helpful.
Incomplete reports will not only undermine the economy or the stock market. There is a high risk and probability that it could divert foreign investors; and it can cause economic unrest and uncertainty as well.
The question is why would foreign investors invest if the currency is projected to depreciated by nearly 20%.
It is, therefore, appropriate to challenge even foreign economists and analysts about their recklessness and invite them to join a discussion to provide an explanation backed by credible data.
Copyright Business Recorder, 2023
(The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper)
He tweets @asadcmka
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