In the wake of dollar appreciation in recent economic scenario, economic policy makers are immensely engaged to brag about prompt rise in the Pakistani exports in the international market.
This may be the probable implication of Pak rupee devaluation, rather, the result of efficient domestic economic policy making and implementation through viable monetary and fiscal policy.
In general, when any country’s currency is devalued, its domestic goods and services tend to become cheaper relatively in comparison with the same goods and services of other economies, hence, exports tend to be boosted up as the rise in the output in the economy. Specifically, as the current government is going to complete its tenure, it adopted expansionary monetary policy which lowered interest rate in domestic and stirred abroad depositors to withdraw their money from Pakistan financial institutions which ultimately caused depreciation of Pak rupee.
In the early period of the incumbent government, it had adopted tight monetary policy and even a recessionary monetary policy which could raise Pak rupee appreciation by transmission mechanism of raised interest rate, lower investment and output accordingly.
Inflation was kept under too much control at the cost worsening off agri-related labor and the return there from accordingly. Therefore, almost Agriculture sector has experienced almost recessionary and deflationary spell, even despite Pakistan being originally agriculture country had to import even agri-products from India and other countries.
As the current government is going to complete its tenure, it adopted an expansionary monetary policy which lowered interest rates domestically and motivated foreign depositors to withdraw their money from Pakistani financial institutions, which ultimately caused the rupee to depreciate
As Pakistan s almost 67% employment is engaged in Agriculture sector, inflationary spell arisen from expansionary monetary policy might make farmers and related agri-engaged ones better-off in recent prospectus. Conversely, Inflationary spell has started trickling down effect, prices of medicines, foodstuff and other necessities are a t their spike worsening salaried and unemployed off, so any increase in the salary of employees in Budget 2018-19 would only have off-setting effect or so called money- illusion.
It would have been better alternative that during Nawaz s regime, there should have been focused on fiscal policy namely cutting taxes, provision of subsidies in inputs and less foreign debt via IMF and other funding agencies, rather than proving out appreciation of Pak rupee which as irony of fact turned out tube bubble phenomenon in Pakistan economy. Appreciation of currency by transmission mechanism of economic growth lower inflation with higher output is only the sustainable and prospectus one, as China and other developed economies have been engaged therein.
The writer is PhD Scholar
Published in Daily Times, April 8th 2018.