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It Shall Rise Again – The Rupee-Dollar Saga

It Shall Rise Again – The Rupee-Dollar Saga

Eleazar Bhatti

So recently the rupee has been falling against the dollar, and this has raised a storm within the economy as the country seems to have divided opinions.

As a majority, half of the country is blaming the incumbent government for their lack of ability to rule and sustain the economy let alone lead it out of the crisis. While the other half of the country seems to support the Imran led government and is merely asking for some time for the policies to set in. But no one is sure exactly how much time do we need.

And then there are some who do not seem to be bothered by it
all – sort of free riders if you may call them. Although the change in
rupee/dollar parity will affect them but they are too chill, maybe just too
cool to let it all sink in – they are above us all, they are above everything –
they are indeed invincible.

But here is the sad part, as most of us debate about the dollar, rupee devaluation, inflation, deficits, loans and bailouts; the majority of Pakistanis are absolutely clue less and yet seem to be affected the most.

The most affected by this economic crisis

I am indeed talking about the labour class, the lowest on
the food chain and the illiterate; yet the very fabric of our society that
keeps it functioning. The group of people that work hard all day and just about
manage to get enough food on the table to keep their stomachs quiet through the
night. The poor of the nation are the most affected and sadly we keep ignoring

I mean we talk about saving up dollars or even selling them to restore balance within the economy, but we often forget about those who have yet to see a single dollar for the first time in their lives. Given the circumstances of our nation, for us Pakistanis the theme song should be “Dollar dollar karti hai, kyun dollar pe tu marti hai?”

That’s all great and yes, we need to do much more than just
talk, write, debate and make false promises before we can bring the poor at par
with the rest of the society. But what exactly happened and why are we talking
about the dollar so much?

The sad truth that we don’t want to admit

Since the Pakistan Tehreek-e-Insaf government took charge,
the economy has been suffering and so are the people of Pakistan. Despite
promises of robust policies and the ‘historic’ return of stolen money, the truth
is that Pakistan was and sort of still is on the brink of bankruptcy. We as a nation
are yet to see billions and billions of stolen monies to be brought back into
the economic system of Pakistan, as promised by our beloved Prime Minister Imran

In short, we borrowed more than we could pay back, and we
got greedy.

Indeed, Imran has absolutely no part in the sh*t storm that Pakistan
is in currently because he has only come into power some 10 months ago; but his
tales of corruption, kickbacks and what nots is yet to unfold. Though the prime
example of that has already begun with Peshawar’s BRT and the billion-tree tsunami,
which was and still is being so skilfully kept under wraps and tight lips.

United we stand?

The almighty dollar went on a rally against the rupee and
the rupee unwillingly had to give in. Last week we saw the rupee drop down to
Rs153.5 against the dollar in the interbank market and don’t even ask about the
open market. The money sharks ate all the dollars from the market, and you
couldn’t even find a single dollar even at Rs170 over the last week.

But behold, the nation came together and started to sell all their dollar holdings to lessen the burden on the economy and apparently it did work. The rupee regained some value and dropped below the Rs150 psychological level against the dollar on Monday this week. And everyone went back to praising the economic policies and the jazba of the nation. Once again our heros in Islamabad were praised and the youthia started bashing everyone else and started chanting idiotic slogans such as ‘2 rupay ki pepsi, PM humara sexy,’ (sometimes I wonder if we should ask Imran to step down from the premiership and try his luck as a model, maybe lux soap would be a great start).

Well enough with my rant. So, what exactly happened?

Market analysts believe that the rupee strengthened on the
back of higher inflows of remittance during the Holy month of Ramadan and Eid. Since,
Pakistanis stationed abroad remit larger sums during this season.

Interestingly enough, it is also being speculated that
although the rupee is gaining against the dollar, it will soon start to
depreciate again once the budget announcements come in along with foreign loan

So, the whole ‘sell your dollars’ drive was for nothing?

In my own opinion, the rupee will appreciate to the Rs148 per dollar level keeping in mind the surge in remittances usually expected around the end of Ramzan and because of the Saudi Loan Facility regarding deferred oil payments easing the pressure on rupee/dollar parity. But it is all short lived and manipulated.

The appreciation or revaluation of rupee is definitely not
because of the market forces as believed by the majority. It is being done
through state intervention, hidden of course at the moment, with the intent of
instilling a sense of calmness, peace and stability amongst the public. The sad
part is that the general public is not aware of the effects of depreciation and
appreciation. The people in power who were once supporting and advocating
depreciation, are now ever so blatantly measuring appreciation as a factor of
success. And I wonder why?

The verdict is that the depreciation is inevitable, rupee will continue to fall in value, sooner than later. The demand for dollar has to rise for foreign loan repayments and we do not have enough reserves, hence the need to buy more dollars.

Eventually, this will all be short-lived, and rupee will be back above the Rs150-151 per dollar level.

Sadly enough, yet wise in business terms, even PTI
supporters will likely book profits on hoarded dollars and will invest in high
yielding fixed income or equities.

What should we do in the future?

Going forward large payments are due in June which will
impact our current account deficit (CAD) and reserves position adversely, so be
ready for another hike and this time selling your dollars won’t help and
neither will your tweets.

But maybe before you start to criticise this
article, go ask the person on the road who is ever so worried about feeding his
kids, how is he planning to lessen the pressure on the economy and ultimately the
rupee – maybe dying for the country may help since we will have less poor to
worry about.