Rupee's Remarkable Renaissance

Amal · March 13, 2014, 5:20pm

Re: Rupee’s Remarkable Renaissance

Are we content with rejoicing on looking at pretty numbers on the screen? ($1 = Rs.97.50 looks better than $1 = Rs. 106) Or is there some tangible effect of this dollar decline? Dollar has slid about 10%, and crude oil slid about 4% over the past week. Does this mean we will be looking at something like a Rs. 10 decline in the price of petrol at the pump? How about prices of other imported items?

You answered half the question in your post. $1.5 billion was pumped in. That was about 60% of Pakistan’s remaining reserves. If your reserves suddenly go up by 60%, it doesnt take a rocket scientist to figure out that the exchange rate will improve as well. But the main question is by the people on the street. Not by the people trading in the stock market, or forex market. People on the street wonder if this will reverse the price increases they experienced during the past 8 months? Answer is, not by this much. Pakistan still has not experienced any increase in revenue generation from the manufacturing sector. They are still relying on making money by taxing the lower class.

Rupee decline 8 months ago was because of massive money printing by the SBP…and this rise is because of massive rupee buying, thanks to 1.5 billion influx, combined with increased remunerations from overseas. Pakistan does not have a sizable trade relationship with the US to be impacted by an internationally declining US currency.

Let us start from this: Nepra approves Rs2.24 increase in power tariff

Dollar regained some of its value today and crossed 100-mark ratio against the rupee again.

The news which Ali quoted in post#7 also reveals that Pakistan has received only half of the fund which Riyadh agreed to help Pakistan. So another $1.5 billion amount is in the pipeline. It means that the see-saw trend in dollar-rupee parity will continue for the time being.

As far as relief for the common man is concerned, it maybe a bit too early to judge the impact of a rejuvenated rupee on the inflation, but if history is anything to go by, I don’t see any noticeable price decrease forthcoming in essential commodities.

Another mystifying development which does not seem to be making any headline is the continuous surge of the Pakistani stock market. With no meaningful business activity going on in the country, the surge of the KSE should raise a legitimate question if the market is being ballooned artificially? If it is only a matter of time that the market will plunge and investors will lose billions or their investment in any single day?