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Pakistan’s official currency is having both a hard time and is in frequent free fall. The Pakistani rupee continues free fall against the US dollar and its regular tumble are now sending shock waves across the economic board of the nation and woes of the Pakistani people. The currency has lost so much of its value in the last four months, plummeting from Pakistani rupee 152 to a dollar to the current Pakistani rupee 173 that the economists are calling this the steepest fall in a single span of time in recorded history since the currency was linked to the dollar in the early eighties.

In the last three years, that slippage of the rupee have been even more striking. It was around Pakistani rupee 92 to a dollar in the year 2017, but then the financial managers of the country were accused of holding it up artificially through means that more administrative than financially viable. It was allowed to reach its natural equilibrium through a raft of policy measures and it seemed to settle down to a little over a hundred for few months. But since it has been sliding despite time to time buying and regular interventions from the State Bank of Pakistan.

China appears to be backing away from its initial financial promises to Pakistan under Beijing – financed China – Pakistan Economic Corridor (CPEC), a US$ 60 Billion infrastructure building plan, amid rising corruption and militant attacks on the Chinese engineers. Work has stopped in many projects and this will escalate the project costs to spiral to new heights.

According to Asia Times, Pakistan Army is set to take near-total control of the CPEC in a bid to reassure Beijing that their investments will be more secure amid militant attacks on the Chinese engineers and others facilitating the infrastructure projects.

Now international assessment suggest that the downhill ride of the rupee will not see a stable value in the coming months and there is more shedding of flab on the cards. Fitch has revised its evaluation of the rupee and is forecasting the currency to go to somewhere between 180 – 190 to a dollar in the next year. Some experts visualise that this might even go down to around Rs. 200/- or more, if the same trend continue.

One view is that there is nothing extraordinary about these developments. Experts document the slicing of the rupee, along political lines and point out how under different governments that situation has remained roughly the same. Dr Furrukh Saleem, an economic analyst once briefly associated with the present government, gave the following statistics in his recent article piece in a local newspaper.

He wrote: “Over the 5 – year PPP period, when Ms. Benazir Bhutto was the PM, beginning in the year 2008, the Pakistani rupee lost 20% of its value against the dollar. Over the 5 – year PML (N) period, when Nawaz Sharif was the PM, beginning in 2013, the Pakistani rupee lost 26% of its value against the dollar. Over the 37 – month PTI period, when Imran Khan is the PM and gave a call for ‘Naya’ Pakistan and began deep strict ‘austerity’ measures, beginning in the year 2018, the Pakistani rupee has lost 36% of its value against the dollar”. The current PM is also accused of selling the gifts, which foreign dignitaries gift to him on official tours and trips, while Indian PM auctions all the gifts, which are gifted to him during his both international and India trips. The protocol is that all gifts are to be deposited in the ‘toshakhana’, which is a gift depository. These have to be treated as national gifts.

This points to structural issues related to the imbalance in imports and exports. Whenever imports outstrip exports the demand and pressure on the dollar goes high, the supplies run short and the rupee takes a strict hit. The same thing is happening even these days. Pakistan has recorded one of its highest gaps in imports and exports in recent times, making US currency an extremely precious commodity, hotly sought after by the importers. Other factors are at work too. The US monetary policy is tighter now than ever before and its inflation rate is lower than Pakistan’s, which has inflation hovering around 10%.

Regional developments too are to be blamed for the rupee fall. Afghanistan’s takeover by Taliban is sucking dollars out of Pakistan’s market as ungoverned space between the two countries allow illicit movement of the currency without any check and balance.

No matter how many dollars the State Bank of Pakistan floats in the market to stabilise the situation, they are all soaked up by those who deal in currency underhand. Local market forces unleashed by the fall of the rupee and rush for the dollar are also at work. Retaining savings in dollars is a cushion against inflation and a protection against the vagaries of the Pakistan rupee.

There are costs attached to the falling fate of the rupee. Take the national debt for instance. Reports say that the rupee depreciation alone has added Rs 2.9 Trillion to the public debt of Pakistan. As foreign debts have to be paid in the US dollars, that trouncing of the rupee is not a happy news for a country strapped for the forex reserves. There are prestige issues as well.Seven months, ago the rupee was the best performing currency in Asia. Now it is the worst of the whole lot. GDP growth rate in Pakistan is expected to reach -0.50 percent by the end of 2020, according to Trading Economics global macro models and analyst expectations. In the long – term, the Pakistan GDP growth rate is projected to trend around 1.50 percent in 2021 and around 4.00 percent in 2022, according to the econometric models.

Pakistan’s foreign exchange reserves are ranked lowly at 64 and with the precarious internal situation and hub of terror activities, no sane nation is investing in Pakistan. Currency devaluation isn’t a bad thing if it could spur exports. That has not happened so far. While the exports have risen the imports have far outstripped them, leaving the rupee reeling. Stabilising the national currency and letting it come closer to its real value is an important economic goal that is yet to be achieved.The state of the rupee is a telltale sign that Pakistan’s road to economic sustained recovery is a long and winding one.

The deadly 9/11 attacks in the US triggered a global war on fund flows to the terrorist organisations, with governments grappling with one of the toughest challenges to peace and security. ‘countering terrorism, financing is an essential part of the global fight against terror threat. As terrorists continue to raise money with use of various unfair means, countries must make it a priority to understand the risks they face from terrorist financing and develop policy responses to it,’ The Financial Action Task Force (FATF), which has been leading global efforts against terror funding. FATF, the global money laundering and terrorist financial watchdog, was set up in the year 1989 at a G7 summit in Paris. It was initially tasked with devising strategies to deal with money laundering. India joined FATF, in the year 2010 and has since then played an active role against terrorist financing. It raised the issue of counterfeit currency, prompting authorities across the world to focus on this menace. India demonetised its currency due to this reason and old currency was taken off and new currency came in the market.

Pakistan has been placed under, FATF watch again and again and this time, its best friend Turkey has also been added and kept in the watch list. This action by the FATF aids to the economic woes of Pakistan. It continues to abet and fuel terror activities and thus will remain in the FATF watchlist.

It hampers the economy of a country in a negative manner where other countries start looking at the grey listed country as a risky nation for investment. Grey listed countries also suffer a blow to its tourism industry as people generally prefer to avoid such a nation. Insurance cover to these nations are added and airlines do have to take additional measures.

With Taliban controlled government in Afghanistan forcing refugees to enter Pakistan, China pulling away from CPEC investments in Pakistan and no financial aid from its ‘grandfather’ US and lower remittance from Middle East, will enhance the financial problems for Pakistan. Even IMF is shying away from lending to Pakistan. The Muslim world is also not giving loans to Pakistan!

On the flight, cockpit doors acquire armoured locks and cameras and pilots are trained and required to see who is knocking to enter the flight deck before unlocking.

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