State Bank Governor Reza Baqir’s comments on how the Pakistani Rupee depreciation is benefitting the families of nine million overseas Pakistanis have attracted public criticism as concerns regarding inflation and economic instability grow.
Speaking at an event in Manchester sponsored by United Bank Limited, Baqir said that the sharp depreciation in the Pakistani Rupee (PKR) may be hurting some but is also benefitting others. For example, families living in Pakistan whose relatives work abroad and send home money in the form of remittances are benefitting, he said. This is because the money in dollars they send back has a higher value in rupees due to the low exchange rate.
He added that every economic policy causes some people to gain and some to lose out.
His words have attracted criticism from the public, as depicted through negative reactions to his comments on Twitter and online platforms. Amid soaring petrol prices and rising inflation, comments from the State Bank Governor that seem to dismiss concerns about a depreciating currency tend to exacerbate frustration and a lack of confidence in the government.
The PKR has depreciated nearly 11 percent against the US Dollar (USD) since its peak in May and has been hitting consecutive all-time lows since the past couple of months. It touched its most recent record low against the USD yesterday at 173.47.
At the same time, the government raised petrol prices to record highs last week by hiking the price of petrol by Rs. 10.49 per liter and that of high-speed diesel (HSD) by Rs. 12.44 per liter. This comes as international energy and commodity prices continue to skyrocket.
Meanwhile, key members of the country’s finance ministry are currently in Washington, D.C., conducting talks with the International Monetary Fund over the next step of the fund’s $6 billion loan program. In a bid to ensure the IMF’s approval of the next $1 billion loan tranche, officials have announced a hike in the base electricity tariff by Rs. 1.39 per unit.
Amid persistent currency depreciation and soaring fuel and electricity prices, many Pakistanis are worried that the coming months will bring forth a sharp jump in inflation and an increase in poverty. There are concerns that low-income earners will be unable to afford food, rent, and other basic amenities.
The Pakistan Bureau of Statistics’s Consumer Price Index (CPI)-based inflation rate rose to 9 percent in September due to higher fuel, electricity, and food prices.
Unless the central bank and the government appropriately address the public’s anxiety over rupee depreciation, this may cause further instability in the economy and markets.