Battle of Pakistan Rupee

2021-11-24 02:46:01 By : Mr. Eddie Jian

The Pakistani rupee has fallen for nearly three years. Needless to say, this has not only significantly weakened the connection between ordinary Pakistanis and the outside world, but also caused great economic punishment to ordinary people. Pakistan’s economic system-at least in theory-is based on market principles, complies with WTO trade rules and regulations, requires an open import economy, and is subject to some mainly politically-driven trade agreements, so it is not surprising. Imports are relatively inelastic and account for a high percentage of GDP, and any depreciation of the Pakistani rupee will automatically cause inflation to rise.

The author has been writing articles about inflation and market economy, and has repeatedly pointed out that one of the main problems of the market economy system is that developing countries or poor countries must pay special attention not only to the degree, but also to the content of the products they allow to enter. It is important to remember that although the goods are purchased at global market prices, the cost will ultimately be borne by consumers. Who can afford it will need to earn nearly 170, 225 which is 200 times that of the United States, the United Kingdom or Europe, respectively! However, since the damage has been caused, the challenge to resolve this situation is to successfully manage the situation with some long-term vision, empathy, and prudence; sadly, there is currently a lack of elements in our economic management.

Although it certainly agrees that the commitment to comply with the WTO and the international community has become a constraint to independent decision-making, China and India have been managing these aspects when they deem it necessary. Even for the so-called laissez-faire Americans, it is only recently that we have seen Trump actually shut out almost all regulations on free trade and climate change when it suits them! In hindsight, now when we see the purpose of Dano's economics, the then Treasury Secretary focused on resisting devaluation, and perhaps he was somewhat proven correct in many respects. Only if he shows the same resilience in controlling unnecessary imports, increasing productivity, and adopting domestic growth-oriented policies to curb deindustrialization, the situation today will be very different.

The author has argued time and time again that, contrary to popular belief, the devaluation drive has little effect on sustainably promoting exports. The gains (if any) are mainly short-term, and the gains in quantity outweigh the gains in value. In addition, as far as Pakistan is concerned, the average value of its exports is low, and depreciation will only cause the actual value of the product to be further lower than its actual value, and in the process will only reduce the international output labor productivity. Picking up any great export story in the world, Japan, South Korea, Thailand, Malaysia, Vietnam, Indonesia, China and now Bangladesh, people will see that export success is achieved by maintaining a stable currency and not due to any devaluation. .

Today, the value of Bangladeshi Taka is twice that of Pakistani Rupee, and their export value is more than twice ours. In addition, we often hear the argument that the natural way to restrict imports is to let the Pakistani rupee fall to the level of automatic import pricing in accordance with market principles. Well, in our example, nothing goes further than the facts, because almost three-quarters of our imports are inelastic, which means that unless we enclose them in other ways, they are called must Indispensable imports, or essential types that cannot be hoped, take into account external security threats, at least temporarily leave. Therefore, for us, the only way to truly break the deadlock is to return to the drawing board and redefine the categories of necessities, keys, raw materials, capital investment, factories and machinery. For example, why do we need to establish industries that only promote imports: such as automobiles, motorcycles, electronic products, fast-moving consumer goods, construction and building materials, etc. Why do we need to promote services that directly increase the outflow of foreign exchange, such as the influx of foreign airlines. Restricted access to shipping companies and rising rates, royalties, technical fees, etc. In fact, it is ironic that even recently the government feels guilty for approving measures to increase the outflow, thereby putting pressure on the rupee rather than releasing it: car assembly plants, Amazon, retail food franchises, power plants and boilers based on imports Coal instead of local coal, semi-finished building materials are just a coat, luxury food, go to od-life medicine, go to the list. In-depth study of imported consumption, and found that even some of our leading food companies rely on nearly 40% of imported materials and footwear companies, and their imported components are close to 70%. Any thoughts about coaxing the country through distorted power plant agreements or strict enforcement of deletion procedures or Pakistan-made promotion or use of iron hands to stop declarations and missed import declarations seem to be a pipe dream.

A few days ago, someone heard the Minister of Finance accuse the taxpayers of not paying enough money, and how he plans to conduct witch hunts to obtain more income, because the government cannot pay its expenses and has to borrow money, which leads to inflation and devaluation of the rupee. Well, he confuses me because the annual growth rate of government spending far exceeds the annual growth rate of tax revenue. By the way, it has maintained double-digit growth since 2013. I believe he really needs to see that he can not only limit state expenditures, but also generate income from state-owned enterprises at his disposal through plans to own his own house. There is no need to compare and analyze the results achieved by smart country managers from all over the world through the use of national investment. All he has to do is to prevent the losses of his affiliates-the rupee saved is the rupee earned. In addition, studies of economic history will tell him that if spending is correct, it means that it will promote growth, development, job creation, and fair distribution of wealth. The government rarely worry about domestic borrowing-the main examples are the United States, the United Kingdom, China and India are now the European Union as one block. Troubles come when economic managers fail to use the tools they have at their disposal to control external accounts. For anyone interested in reading the Federal Reserve Chairman’s charter, his main responsibility is to defend the value of the U.S. dollar. There is no real secret. After the Bretton Woods system, the real battle is not about the number of tanks or fighter jets a country has, but about the strength of a country's currency.

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