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Thursday, May 23, 2024

Pakistani rupee makes a comeback against the US dollar

Recent developments in Pakistan's economy include rupee depreciation, government measures to address challenges, and UAE's commitment.

The Pakistani rupee is stealing the spotlight lately, and for good reason – it’s making a remarkable comeback against the US dollar in the interbank market. This is music to the ears of Pakistan’s economy, which has been going through a rough patch lately. The recent turnaround is a ray of hope for the country and its citizens.

Depreciation Causes

The depreciation of the Pakistani rupee has been one of the biggest concerns for Pakistan’s economy. This has caused much alarm among economists and citizens alike, as it poses a significant threat to the country’s financial well being. A multitude of factors have contributed to the depreciation, including a lack of foreign investment, an unfavourable balance of trade, and a decrease in foreign exchange reserves. Additionally, a decrease in the country’s foreign exchange reserves has added to the pressure on the Pakistani economy.

Government Measures

To combat these economic challenges, the government has taken various measures to give a boost to the economy. These measures entail scaling down on subsidies, eliminating an artificial cap on the exchange rate, introducing taxes, and increasing fuel prices. While these actions have not been without their own set of criticisms, they have nonetheless played a crucial role in stabilising the economy to some degree.

Read More: Dar presents PKR 170 billion ‘Mini Budget’ to unlock IMF package

UAE’s $1 Billion Commitment

Pakistan’s beleaguered economy has received a significant shot in the arm with the UAE’s announcement of a $1 billion commitment. The Finance Minister, Ishaq Dar, confirmed the news and stated that the UAE has communicated its pledge of $1 billion to the IMF for supporting Pakistan’s economy. This development has been well-received by the State Bank of Pakistan (SBP), which has already started working on the necessary documentation to facilitate the deposit from UAE authorities.

Recovery Impact

The recovery of the Pakistani rupee against the US dollar is a positive development for Pakistan’s economy. This turnaround is expected to have a positive impact on the country’s fiscal situation, which has been under strain for some time due to a lack of foreign investment, declining foreign exchange reserves, and an imbalance in imports and exports. Currency dealers believe that the market has been boosted by positive sentiments around the country’s economic prospects, including the anticipated unlocking of the delayed $1.1 billion IMF loan tranche. The loan will provide much-needed support to Pakistan’s struggling economy, enabling the government to implement measures to reduce subsidies, implement fiscal policy adjustments, and address the balance of payments issues.

Economy Challenges

Despite the government’s efforts to stabilise Pakistan’s economy, the country still faces significant challenges, including high inflation and unemployment rates. These issues have put immense pressure on the citizens, especially the youth who struggle to find employment opportunities. To ensure long-term stability, the government must focus on creating a business-friendly environment by improving the country’s infrastructure, reducing corruption, and implementing policies that encourage foreign investment. These efforts will not only boost Pakistan’s economy but also create more job opportunities and improve the standard of living for its citizens.

Read More: Dollar continues its flight towards PKR250

Pakistan’s economy has faced numerous challenges, including the depreciation of the Pakistani rupee, high inflation rates, and unemployment. However, the recent recovery of the rupee and the commitment of $1 billion by the UAE offer some hope for the country’s economic future. To ensure long-term stability, the government needs to create an environment that is conducive to business and investment by improving infrastructure, reducing corruption, and implementing policies that encourage foreign investment.