Effects of Mercurial Dollar Rates on Pakistan Economy:
An ever-rising and falling exchange rate can make a researcher ponder the effects of mercurial Dollar rates on Pakistan’s economy. Even though many world currencies are more substantial than the US dollar, it is a crucial currency for international business activity. Currencies such as Euros and the British pound have been more significant than the US dollar for as long as our generation could remember. Nonetheless, the very reason the US dollar has the upper hand is its liquidity. It is also why the ups-and-downs in the exchange rates force developing economies such as Pakistan to keep their economic policies under strict check and balance and change it frequently and accordingly.
How Effective were Previous Governments?
A bird’s eye view on the past decade’s exchange rates will show that the US dollar fell as low as PKR 75.57 in 2011. It was when the reins of political leadership were in the hands of Ex-President Asif Ali Zardari. The leader in question is known for his corrupt tactics. Nonetheless, it is worth mentioning here that the economic conditions during Zardari’s presidency were on the improving side since Pakistan People’s Party’s (PPP) government initiated many programs, such as Benazir Income Support Program (BISP), to pull impoverished masses of the society out of extreme poverty.
Owing to such programs, the circulation of money increased in the market, which kept the dollar exchange rates from rising and drastic fluctuations. Moreover, as programs like the Benazir Income Support Program gets their significant funds from foreign organisations, such as the Department of International Development of the United Kingdom, the influx of foreign exchange earnings also increased. Such incoming of foreign currencies is actually what assists in maintaining a favourable exchange rate.
Effects of Mercurial Dollar Rates on Pakistan Economy During Mid-2013 to Mid-2018:
A little know-how of politics and economy concepts can help any learned person deduce that both ideologies work hand-in-hand. It is why the period from the last quarter of 2013 till mid-2018 sees a significant upsurge in the exchange rate of the US dollar into the Pakistani rupee since the then finance minister Mr Ishaq Dar fixed the exchange rate for the US dollar instead of allowing the market forces of demand and supply to determined its actual level. As a result, the effects of mercurial Dollar rates on Pakistan Economy became devastating. It not only burdened the country’s economy, but it also affected imports, exports and trading.
This period gave birth to exponentially increasing inflation and a titanic decrease in Pakistan’s foreign exchange reserves. The only prospective role in limiting Pakistan’s breaking economy was played by the investments and developments made in the China-Pakistan Economic Corridor (CPEC). In other words, where Pakistan’s relations took a rocky road with the United States of America, the Chinese Yen filled in the gap of foreign exchange earnings left behind by the US dollar at the worrying rate of PKR 123.49.
The Current Scenario:
As much as the critics criticise and argue over Pakistan Tehreek-e-Insaf’s (PTI) political and economic policies, the World Bank reports show that Pakistan’s economy is on the road to progress.
Even though the exchange rate of the US dollar went up as high as PKR 168.88, the World Bank’s reports demonstrate a nine per-cent increase in the Gross Domestic Product (GDP) of Pakistan.
What’s more, this upturn occurred even though the country is struck with COVID-19. One of the many factors that affect such growth is the usage of formal money transferring methods. It worked as a blessing in disguise for the State Bank of Pakistan. It brought in reasonable amounts of foreign exchanges – including Euros, British Pounds, Riyals, and the US Dollar – to Pakistan. Moreover, Imran Khan’s policy of opening bank accounts for overseas Pakistanis and letting the US dollar determine its value via market forces have painted the accurate picture of where our economy stands.
Considering that superficially formulated economic policies, dependent foreign policy of Pakistan, haphazard policy implementation, and unstable political conditions of the country, it would not be wrong to suggest that we need to work on the grassroots level to rebuild the economy rather than relying on external elements. Indeed, the rise and fall in the US dollar exchange rates can influence some parts of the economy. However, it is not something to be entirely relied upon.
Domestically, Pakistan can reconstruct its economy by researching and advancing its elementary industry, i.e. agriculture. To counter the effects of rising US dollar rates, it is noteworthy to propose investment in freelancing since it can prove a significant source of foreign exchange earnings. Today’s government needs to focus on initiating programs that would help the working class learn and build upon such skills that have the aptitude to decrease the imports but increase the exports, both in terms of goods and services. Most importantly, it needs to be given due consideration that not the economy but politics is the key to success.