In a series of tweets, Pakistan-born economist Atif Mian analyses how the Pakistani rupee has lost 20% of its value and that the key issue will be “rationing”, in the short run.
Atif said that the rupee has lost 20 per cent of its value in the last three months while the current account is currently negative.
“Pakistan has left itself almost completely at the mercy of foreign assistance – this is the real sin of its political elite. Energy is mostly imported, medicine are mostly imported, and even in food unfortunately, Pakistan is no longer self-sufficient,” he said.
He added that when oil prices were going higher, Pakistan was selling some of the cheapest oil in the world domestically. “PTI government reduced price domestically and started to subsidise it. How can Pakistan pay for it?”
He said that the toughest challenge Pakistan faces is bringing back some modicum of credibility with investors and its own people.
“The powerful are knee deep in unproductive, rent-seeking sectors like real estate and sugar. That must change. The taxation and incentive structure must favour productive activities over unproductive ones and open up the economy to women,” he further said.
Earlier, the rupee continued its fall in the interbank market, closing at a historic low of Rs225 against the US dollar.
According to the SBP, the rupee closed at Rs224.92 against the dollar, down Rs2.93, from yesterday’s close of Rs221.99.
Commenting on the rupee fall, Finance Minister Miftah Ismail said: “The panic in the market is primarily due to political turmoil, which will subside in a few days.”