Many people are confused on how devaluation of Pakistani rupee affects Pakistan economy. Many are under misconception that devaluing rupee would increase exports (due to decreasing price of exports) and decrease imports (due to increasing price of imports), so it is good for country. Well, it is true that devaluing currency could be good for economy but it can also be bad for economy, depending on situation and economical reality of a country. For most countries, including Pakistan, devaluation of local currency is bad for economy and country.
Why? Because most foreign currency Pakistan earns is from agricultural based products (either primary or secondary) and remittances. Output of Pakistan is such that both of these products are inelastic to value of currency. For instance:
Pakistani agricultural products ... get exported as long as Pakistan produces them enough to export, so their market is not dependent on prevailing price but output. Reduction in value of rupee would only mean reduction in dollar earnings, as exporters would export them cheep to export them quicker. Pakistani remittances also do not depend on value of rupee with respect to dollars but on people working abroad and how much they send home. Actually, devaluing rupee means trust on rupee would deteriorate and that means people holding back their remittances.
So, devaluing rupee would not increase exports neither would increase remittances. Rather it would adversely affect both. Pakistani currency devalued extensively from 1988 to 1999 ... (Rs 17 to a dollar to Rs 54 to a dollar) ... still, Pakistani export did not increased. Actually, it stayed around $8 billion from 1994 to 1999.
As for imports: Pakistan main imports are oil and liquid gas. Last year, Pakistan imported around $10 billion worth of crude oil. If Pakistan has to keep developing, these products would keep getting imported regardless of rupee value. So, devaluing rupee would not reduce their imports and if it does then it would be at the cost of growth and development.
As for finished goods, Pakistan imports mostly machineries and they would have to keep importing if country has to grow, but if not then again it would be at the cost of growth and development. As for secondary goods Pakistan imports, it would keep coming as long as those who use them have no problem with money. For instance, Nawaz Shareef and Zardari would not change to Pakistani built Suzuki, and would keep using big foreign cars regardless of their price in rupee. They would keep travelling to London and Dubai regardless of what it would cost. Their children would keep spending same amount of foreign currency regardless of what it would cost in rupee.
So devaluing Pakistani rupee would never help Pakistan rather it would only increase inflation, reduce remittances, reduce export receipts, and would hinder growth and development of the country, bringing misery to poor as well as middle class.
Devaluing rupee means increase in debt as well as interests. At present, Pakistan debt is around $42 billion. Rupee devalued by around Rs 12 during last 8 months (mostly during last 3 months) and it means increase of around Rs 500 billion in Pakistan debt due to devaluation. Pakistan pays around $4.5 billion to service dollar debts and that means Pakistan have to pay extra Rs 54 billion in debt servicing on dollar loan alone every year due to rupee devaluation.