The rupee’s fall over the last few days wouldn’t be so extraordinary in ordinary times, because the dollar index is at a 20-plus-year high, which means the greenback is rising against almost all other currencies. The real problem, then, is the precarious balance of payments (BoP) position just when the economy is barely balanced on a knife edge; which means that even the smallest slip will send the country tumbling into sovereign default. And with the falling currency complementing the Fitch downgrade and the money from the IMF bailout program taking its sweet time coming, it’s very understandable why panic has started spreading through the market. What is not so clear, though, is why the state bank is not intervening to put a floor under the rupee. Sticking to its principles and letting the currency float is all very fine in normal times, but the custodian of the monetary sector will have to do whatever it takes to fight the prospect of contagion. It does not want to be in the unenviable position of having to just that – intervene – when it is too late; meaning throwing a lot more money than necessary with far less to show for it. Unless it is already intervening, with no effect whatsoever, and not letting it out because it just burnt a precious part of our scarce foreign reserves and it didn’t make any difference at all. Either way, something extraordinary needs to be done. The first order of business ought to be ensuring complete transparency. There’s already plenty of panic out there, which means we’re not very far from the doomsday scenario, so there should be no unnecessary uncertainty to go with it. Why are there accusations that banks are making a killing by speculating in the currency market? And why are there rumours of trading companies hoarding foreign exchange? Surely the SBP’s acting governor understands that nothing takes the life out of financial markets like uncertainty, not even bad news which is quickly priced in. It’s not as if he can’t read the writing on the wall: we’re beyond the critical threshold where fear turns into outright panic. And, at the risk of repetition, unless something is done immediately, the next stop is going to be contagion. That’s something fragile economies on the brink of default are not known to recover from. *