http://dawn.com/2013/01/21/rupee-at-historic-lows-2/
The Pakistani Rupee (National currency of Pakistan) has been on the decline for the last few years (post 2003 predominantly). There was a point when it's downfall seemed to have been halted but as the article shows that is no more the case.
Politically instability and the lack of domestic production are the main perpetrators of this. The article mentions the failure of the current government, the increasing protests over lack of action against target killings and the recent long march. All these things go disrupt trade which does not give the Rupee a chance to fight back. However, the article fails to mention the most important factor the lack of domestic production or should i say the diminishing domestic production. The simple reason for that is the severe energy crisis; there is a severe shortage of electricity. Factories can't keep up with their costs due to expensive electricity and then the added cost of running generators and so shut down.
However, the matter of fact is that the Rupee is depreciating to dangerously low levels and might hit the point of no return soon. If this happens, who can guess the future of Pakistan and if Time magazines prediction of the country breaking up by 2025 will come true. I pray that is not the case but alas that praying is the only hope-for now.
A lot of companies that produce domestically in Pakistan are going bankrupt and are facing legislation against Banks since they cannot pay back the millions they owe. The energy crisis, the on-going strikes and public holidays that almost consistently halt production are not letting these domestic producers do what they do and are causing them to shut down. For example, the textile industry in Pakistan has taken a huge hit and is not as dominant as it used to be in world trade.
ReplyDeleteInsightful article. I think trade liberalization and promotion of privatization should be enough to stimulate the economy and utilize the existing energy resources in order to meet the current energy demand. Similarly, encouragement of FDI in many sectors should be done. Theses sectors should be ones where there is enough scope of fair competition between domestic and foreign producers.
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