Report
Will the weakening of dollar reverse the inflation?
The Pakistani rupee, on Wednesday, witnessed a massive gain and closed at Rs228.8, making a remarkable recovery of Rs9.58 – the highest since November 2, 1998 – after battling against the dollar for two consecutive weeks and falling to its lowest of Rs239.94
on July 28.
Analysts predict the greenback may decline below Rs200 in the upcoming days, as Pakistan inches closer to the release of $1.1 billion bailout funds by the IMF, having met all of the global lender’s conditions, the last of which was an increase in the petroleum
development levy on July 31.
However, the repercussions caused because of the devaluing of the Pakistani rupee cannot be ignored.
While the rupee kept losing its strength, the country witnessed the highest surge in inflation. Fuel prices skyrocketed, which led to a surge in power tariffs. As per the data shared by the Pakistan Bureau of Statistics (PBS), Pakistan’s inflation rate for the month
of July was 24.93% – the highest the country has seen in the last 14 years.
Owing to the country’s economic culture, once the commodity prices are raised, they seldom witness a decline.
The automobile industry for instance will be reaping the benefits of the surge in inflation, since the drastic dip in local currency value had forced nearly all carmakers to increase the prices of their cars massively – the burden of which will be of course transferred onto
the consumers.
Pakistan’s imports for the month of July amounted to $4.913 billion when the local currency was constantly depreciating. The question that arises: would the prices of the commodities imported at the US dollar rate of Rs239.94, decrease once the value of the greenback declines? The answer is a resounding NO.
As few expert says that dollar will fall to 175 to 180 PKR Hence, the question of the hour is:
Which political party will be taking the responsibility to take the necessary steps needed to ensure macroeconomic stability in the country? The massive financial crisis that the economy has borne, how will it be stabilized and more importantly the ripple wave effect this has had on the country’s inflation rate, how will that be rectified
About The Author
Engr. Muhammad Waqas ur Rehman
editor in chief
Engr . Muhammad Waqas ur Rehman is a software engineer with his expertise in digital media, eCommerce, an author and a business expert.
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