Amid a plummeting value of rupee and a rising cost of living, Pakistan is facing a severe crisis of balance of payments, which is reflected in the unexpected but sharp hike in the prices of petroleum products in the country. The rise in POL prices, which is directly proportional to the rise in the prices of other items, is likely to push up prices of all essential commodities of daily use.
The current recession, which has already exhausted the purchasing power of the people, is harming businesses across the board as the government seems to have failed on all fronts to avoid default.
A country’s economic stability depends on things like the goods and services it can produce, armed conflicts, health crisis, market trends and consumer confidence. But, Pakistan’s economy went through its spells of highs and lows, much like the same way as a wave in the ocean: when it grows, its crest comes to a peak and then it declines only to start rising again.
However, the ongoing economic contraction or downturn has seen the rupee falling to abysmal low to trade at Rs 275 against the dollar in the open market.
Since the start of the 2022-23 fiscal, the rupee’s official value has depreciated 11.23pc against the dollar. The recent depreciation in the value of rupee would push inflation to a higher level and subsequently it will erode the remaining purchasing capacity of most Pakistanis. This is going to impact growth in the most negative way.
The longer the economic recession, the harder it becomes to reverse its effects, like low utilization, low investment, fewer goods and services, and unemployment.
Experts believe that removing the currency cap would have a positive impact on the stock market and would bring Pakistan in a position to strike a long awaited and anticipated deal with the IMF. They say that the decision to cap the currency has negatively impacted the country under a fast-changing global economic situation.
Pakistan is running three currency markets at the moment – the interbank, open market, and black market – with all three offering different exchange rates.
Owing to the multidimensional crises ranging from a political uncertainty to economic instability to flood devastation and lack of employment opportunities, the country’s economy is teetering on the edge of collapse. The sharp and consistent rise in the prices of food and fuel is causing real pain to the man in the street. The country’s political leadership and economic czars need to put their heads together to find a way out of the current imbroglio.
