Continuous decline
The recent bloodbath in the stock market and worsening economic conditions in Pakistan are attributed to electoral uncertainty, depreciating rupee, and concerns over inflation and interest rates.
Topics
Posted 9/1/2023, 2:19:46 AM
dawn.com
Relevant topic timeline:
The depreciating exchange rate of the Pakistani rupee against the US dollar is leading to a potential economic disaster, with increased inflation, higher prices for petroleum and fuel, and a rise in poverty and unemployment.
The Pakistani rupee weakened further against the US dollar in the interbank market due to higher demand and uncertainty, while the open market remained stable; however, insiders noted that currency dealers were selling the dollar at higher rates in the open market.
The rupee's decline against the US dollar is being attributed to the powerful influence of the grey market and the International Monetary Fund's involvement in Pakistan's financial system, leading to a loss of control over the exchange rate and economic uncertainties.
The Pakistani stock market experienced significant losses in response to rumors of an interest rate hike, economic uncertainty, and the depreciation of the rupee.
The consistent devaluation of the Pakistani rupee is causing inflation and forcing the central bank to raise interest rates, leading to concerns about the economy and market confidence.
The relentless surge in pressure on the exchange rate and price level in Pakistan over the past two and a half years can be attributed to serious malfunctions on the balance of payments and fiscal accounts, which have thrown the monetary aggregates far from their projected path to stability. This has led to inflation and exchange rate pressure, and traditional IMF-mandated adjustments alone may not be enough to resolve the situation.
The current economic crisis in Pakistan is driven by high inflation, mismanaged policies, and failure to ensure price stability, leading to a weakened currency and a struggling middle class, but implementing radical reforms such as demonetization and swapping out foreign currency debt can potentially alleviate the situation and revive the economy.
The Pakistani rupee has depreciated significantly in the first three weeks of the interim government's tenure, reaching a record low and making it the worst-performing Asian currency this quarter, due to factors such as a change in government and high inflation. The State Bank of Pakistan is implementing measures to address the economic challenges, including reforming the exchange rate and modernizing the banking system.