The Governor of the State Bank of Pakistan, Tariq Bajwa, in his much-awaited press meeting stated that currently the rupee’s exchange rate is “closer to the equilibrium”.
This is really ironic considering the fact that the rupee has been under great pressure recently and has lost its value substantially. The rupee has been devalued by a further 1.6% already and one US dollar is currently worth Rs. 110.64.
The total increase in a span of a mere three days is 4.9%, which clearly shows the poor management of the increasing debt and trade deficit.
Earlier, the State Bank explained that this devaluation was merely an intentional market tactic to smooth out deficits while the exchange rate with the US dollar fluctuated between Rs.109.5 and Rs.110. SBP officials claimed,
In the view of SBP this is a market-driven adjustment in the exchange rate which means it will show an imbalance in the external account and sustain higher growth trajectory.
In Bajwa’s current meeting, he said that this change in foreign reserves and rates is to compensate the current account deficit. He explained,
The current account deficit is a serious challenge and the movement in exchange rate is in response to this challenge.
The exchange rate is now closer to the equilibrium, we were away from the equilibrium.
The SBP Governor, for the first time, decided to let the public in on their decision to intentionally let the currency get devalued.
The International Monetary Fund (IMF) advised the ministry to let the rupee lose at least 16% value (which would make the exchange rate with US$ at approximately Rs. 120). Even though the governor assured its equilibrium, the future value is still uncertain. The chief has a lot of confidence in the near future of Pakistan’s economy and accordingly, many investing parties have the same view.
So far, the currency has seen a 4.9% devaluation and overall, the current value of the rupee is at an all-time low.