Do you remember an old adage:
‘ye cheez to Takkay ki nahiN hai’ (This thing is not worth a Takka).
Well, today the tables have turned. What was once true of BD Takka is now true for a Pakistani Rupee. As of today 1 Bangladeshi Takka equals 1.14 Pakistani Rupees . The phenomenal slide of Pakistani Rupee, which started around January 2008 continues unabated. Pakistani rupee is now trading at very close to 80 Rupees to a US dollar. Yahoo Finance was quoting Pakistani rupee at Rs 78.375 to a US dollar on October 6, 2008.
We also had a post on this topic back in May 25, 2008 when Rupee had slid down to Rs 68 for a dollar but this time slide in Rupee’s value seems like the steepest in history of Pakistan. Rupee has lost almost one third of its value in the past 10 months.
The question that everyone is asking is whether current Government is capable of controlling this situation or is it beyond anybody’s control.
Pakistan’s finance Minister (since May 12, 2008) is Mr. Naveed Qamar and atleast I’ve not heard anything from him about what are Government’s plans to bolster Rupee’s value or to stop fast depleting foreign exchange reserves of Pakistan (now down to approx $8.1 bn).
What is happening to a common person among all this turmoil is depicted well in a sher by Anwar Masood.
“jo dil pe guzarti hai raqam karte raheN ge”
kal tum ko bata deN ge raqam kitni bani hai
Reference:
One of the guys on this forum has asked what an individual can do to help the country in this crisis. I think this is the most important point someone has raised. It is useless to make suggestions that who should be the finance minister and who should not be. Let
Banker,
You say “Why is it that if the economy was so sound for last 7 years, it has crumbled in less than 7 months. Its because the growth of last 7 years was a facade.”
If it was a facade, how did Pakistan’s tax revenue and GDP double in 2000-2007? You know, it takes a lot more effort and time to build than to destroy, particularly when it comes to building confidence of consumers, investors, businesses etc. You can not create millions of jobs and move 10-15m people from poor to middle class if you are not trusted. The world of business and investment had faith in Shaukat Aziz and Pervez Musharraf. That faith disappeared with the appearance of Zardari and Co, and Pakistan returned to the bad old days of the 1990s when PPP and PML(N) made a mess of Pakistan’s economy. Antiquated, central planning types like Kaiser Bengali can not help restore confidence. They are relics of the past, unfamiliar with how to navigate a modern national economy out of troubled waters.
I invite you to read with an open mind and understand Aziz’s and Musharaf’s economic legacy and Zardari’s economic policy at:
http://www.riazhaq.com/2008/07/shaukat-azizs-econo mic-legacy.html
and http://www.riazhaq.com/2008/09/will-economic-mess- get-worse-under.html
Now, only blame we can have with the present regime is that they have taken too long to realize the severity of crisis. If the western democratic governments are receiving flak for delayed decision making, we should cut some slack to our democratically elected government.
Most important question is: What is to be done? Nobody is going to give us $100 Billion at the drop of a hat. They might give us $50 Billion over a period of 5 years i.e., $10 billion every year. But they need to see a program of how the present government intends to step out of the current mess even if they give us $50 billion.
First thing we need to do is to use local economists and we do have some really good ones Kaiser Bengali, Shahid Siddiqui, etc and use the Planning Commission (thats why its there) to chalk out a plan to stabilize the country say with the first $10 billion. We need to put focus on agriculture and expand our export base. It wont happen overnight but a plan has to be put in place to make use of the funds and how they will be repaid.
And please get rid of Shaukat Tarin. Being a banker and having been involved in KSE, Citibank, Habib Bank, Union Bank and Saudi Pak Bank and having made billions; like his predecessor he can only put in place short term money making policies. Because that how the bankers are trained. Next quarter end, bonus targets etc. We need people who think like economists, in terms of sustainable development etc. I can assure you, Shaukat Tarin or anyother banker who has spent his life in commercial, investment or coporate banks are incapable of doing that.
And if nothing works, we can always abduct some pakistanis, have them raped in Afghanistan bagram base and sell them to US for a few hundred thousand dollars each. It has sustained our economy so far.
Lets first put the blame where its deserved. Why is it that if the economy was so sound for last 7 years, it has crumbled in less than 7 months. Its because the growth of last 7 years was a facade.
Pick up any report and it shows that the only growth was in service sector based on increasing consumerism. By reducing interest rates, the financial sector made huge profits. First they reduced rate of deposits which resulted in decreased savings rate. Secondly, credit culture was increased with the whole country borrowing crazily on multiple credit cards. Had the consumption been to buy locally manufactured goods, it would have increased the manufacturing base of the economy. Most of it was used to purchase imported bikes, split ACs, LCD TVs, locally ASSEMBLED cars wherein huge amount of foreign exchange reserves were used to import such luxurious items without any regard for the fact that cars run on fuel which is imported and all the electronic items run on electricity which we are going to run out of in mid 2008. Not a single megawatt was added to the national grid by previous government despite the fact it is known since 2001 that at current growth rates, we will run out of electricity by 2008.
Would all these admirers of previous regime care to enlighten me how much of the FDI went into increasing our export base. Zilch. It came for buying profitable entities that were privatized where they have already taken out more in profits in last of 4 years than they have put in. It came in to casino (stock market) and alternative assets (real estate) which has increased so much that its beyond even in dreams of average pakistani to own a house.
So much for the policies of previous regimes…..
Waqas – I have been holding to the last bit of hope for a looong time. The events of the last 2 years or so have been terrible. There is NO reason whatsoever for things to be this bad, and still deteriorate.