Pak. rupee recovers

By B. Muralidhar Reddy

ISLAMABAD, OCT. 21. After weeks of anxious moments, the financial managers of the military government have finally something to celebrate. The rupee that took a severe battering in recent days has registered a spectacular recovery this week.

The recovery is reported both in the government controlled inter- state bank mechanism as well as in the open market. It gained by about 2.5 per cent. On Friday alone the dollar was dearer by a rupee in both the markets.

The recovery made by the Pakistani rupee can be gauged from the simple fact that it was quoted in the inter-state bank exchange at around 55.95 as against 60 two weeks ago. In the kerb market it was sold at 59.90 against 64.50 last fortnight.

Several factors could be attributed to the gains made by the rupee. Reluctance on the part of exporters who were not bringing their proceeds back home and of the non-resident Pakistanis to withhold their remittances increased pressure on the rupee. The Finance Minister, Mr. Shaukat Aziz, was perhaps right when he accused vested interests of creating panic in the money market and pushing the rupee value against dollar.

Two weeks ago when the rupee continued to plunge despite best efforts by the central bank of Pakistan to halt the slide it appears as if it will touch Rs. 75 mark a dollar. In the first week of October in a span of just three days the value of dollar in the open market had gone up by almost three rupees.

The general expectation was the rupee would stabilise only if and when the International Monetary Fund (IMF) resumes the stalled financial assistance to the country. Pakistan is engaged in excruciating negotiations with the Fund officials for a bailout package and indications are the first tranche of a Standby Loan Arrangement would not materialise before the end of November.

Several factors appear to have contributed to the sharp and continuing fall of the value of the Pakistani rupee. The Pakistan Government, exporters, the super rich and speculators are all considered responsible for the plight of the rupee. The precarious forex position of Pakistan with reserves just sufficient to finance three weeks of imports made matters worse.

Pakistani press is full of reports of a trend called `dollarisation' of the economy. The elite of Pakistan is believed to be converting its currency on a large scale into the greenback in view of the apprehension that hard days are ahead on the economic front and rupee would receive further battering.

Last few months have also witnessed unprecedented clamour for visas of western countries. The U.S. Embassy alone receives 1,600 applications every day from Pakistani citizens. Of course, majority of the requests are rejected but it is an indication of the rush.

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