3 Ways IMF Can Hurt Pakistan

Notably, the International Monetary Fund (IMF) wants the administration to devalue the Pakistani Rupee (PKR) so fuel costs growth and inflation worsens.

Key points

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• Ashfaque estimated that the combined cost of currency devaluation and high interest rates over a five-year period has reached around $148 billion.
• Speaking to a private news channel, Ashfaque remarked the Pakistani rupee could be trading around Rs.
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Speaking to a private news channel, Ashfaque remarked the Pakistani rupee could be trading around Rs. 235 against the US dollar instead of Rs. 277-278 if SBP does not intervene in the foreign exchange market.

He remarked there is excess dollar supply in the market and argued that the rupee would appreciate significantly if the central bank ceased purchasing dollars. According to him, the current exchange rate is therefore being managed around Rs. 277-278. IMF Costs Pakistan More Than 9/11.

Ashfaque estimated that the combined cost of currency devaluation and high interest rates over a five-year period has reached around $148 billion. Weaker PKR, Higher Petrol Cost.

He cautioned that further depreciation would raise the rupee cost of imported oil as international oil rates are converted into rupees at the prevailing exchange rate. This could push domestic fuel rates higher, adding to inflation and potentially forcing the SBP to maintain or rise interest rates.

Ashfaque additionally questioned whether a weaker rupee automatically increases exports. Pakistan's exports were around $32 billion in 2018-19 when the rupee was significantly stronger. Despite the currency afterwards weakening from around Rs. 180 to as much as Rs. 307 per dollar, exports did not rise significantly.

There is a need for selective and aggressive import compression. Pakistan should restrict large-scale imports of luxury vehicles and other expensive goods until its balance of payments position is fully under control, he continued. Stay Connected with ProPakistani.

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Taken together, the developments around 3 Ways IMF Can Hurt Pakistan point to a situation that is still moving, and the coming days should bring more clarity.