Business | Markets
Exchange rate slide causes friction
The slide in the exchange rate of Pakistan's rupee on Friday caused much friction among direct and equity investors eager to count their losses caused by the devaluation.
- By Farhan Bokhari, Special to Gulf News
- Published: 00:11 May 4, 2008
Islamabad: The slide in the exchange rate of Pakistan's rupee on Friday caused much friction among direct and equity investors eager to count their losses caused by the devaluation.
In the short term, such a development is bound to weaken the outlook of the rupee, just at a time when Pakistan is eager to stabilise its economy.
But in the long run, such a devaluation may not necessarily be all that harmful to the country's economic interests at a time when Pakistan's industrial output is also in danger of falling further. This is largely due to a fall in industrial production caused in part by the failure of Pakistani producers to increase exports.
If the rupee's slide helps industrial output grow, the future may not necessarily be as bleak for Pakistan's economy as it seems today. However, the country's equity and financial markets will play a major role in managing this transition.
Rather than tackle the challenges confronting the economy, Pakistan's new government has begun taking the country increasingly towards uncertainty by working to largely undermine the economic legacy of its predecessors.
Such an approach has resulted in many investors finding themselves far better in locations outside Pakistan. The slide of the rupee caused by an intensifying flight of capital from Pakistan is not an unexpected conclusion to recent events.
Pakistan is primarily an agricultural country, and this profile indeed calls for a new emphasis to increase farm exports.
There are too many challenges in Pakistan for the currency to feel secure. There is no reason for this economic uncertainty to continue. The new government must calm anxieties across the equity and financial markets, as a basis to set the pace for a long term rise in exports - industrial or commodity-linked.
- The writer is a journalist based in Pakistan.
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