The sharp plunge in the rupee value was inevitable, but it seems there were no plans on the part of the government to tell the public that they need not to worry.
The sharp plunge in the rupee value was inevitable, but it seems there were no plans on the part of the government to tell the public that they need not to worry.
The correction was long overdue and if it had not happened on Friday it could have happened later. It is shocking for those who know the financial market volatilities, and it did cause panic among the people, for which the government should take blame.
Just a day before the markets saw rupee taking the largest single-day plunge in years, the PTI government marked its 100 days in office with big pomp and show.
Speaking at the ceremony chaired by Prime Minister Imran Khan in Islamabad, Asad Umar boasted his achievements since he took over as finance minister and tried to downplay the significance of the government efforts to get a bailout package from the IMF.
He said the government was in no hurry to sign the IMF deal.
At his press conference that followed the rupee fall, he very rightly pointed out that the exports, foreign remittances and foreign investment figures for the recent months were showing encouraging signs and in the medium-term the country might be able to ease pressures of the current account deficit.
He was also right to say that it is the responsibility of the State Bank of Pakistan to deal with the exchange rates, and the rate is in fact determined by the market forces.
However, it is also the responsibility of the government not let to let speculators rule the roost in the market, and save small investors from the exploitation of the rumour-mongers through timely action.
The finance minister needs to tell the people in more clear terms what he has achieved so far on meeting the financial challenges particularly in the short-term.
Except winning a commitment from Saudi Arabia for $6 billion assistance, nothing concrete has so far been pledged by any other country or at least has not been announced by the government for reasons best known to it.
The government leaders, including the prime minister, have spoken about firm commitments from the United Arab Emirates and China in this regard but nothing substantial has so far come into public knowledge.
Such ambivalent announcements might pacify the government supporters, but these could not satisfy the financial and stock markets which plunge into uncertainty in absence of clarity from the government side. Resultantly, the rumour mongers and speculators get a field day in the market.
Soon after the rupee plunged, the rumours were making rounds in the market that the government has “quietly” given an assurance to the IMF that the rupee would be drastically depreciated.
“It will fall up to Rs150 for a dollar. They will eventually do it,” a leading forex exchange dealer said.
It would have been better for the finance minister had he taken the public into confidence about the talks being held with the IMF.
The media leaks after the talks in Islamabad that the IMF team was putting unrealistic conditions and the government has refused to accept caused uncertainty in the market. This followed by the sudden devaluation of rupee in a big way in a single day gave rise to more speculations and rumours.
The government leaders, particularly the finance minister, need to avoid populist positions and instead take realistic positions. They should tell the people in clear terms what was the economic and financial position of the country and what their strategy was to deal with it.
Devaluation has never been bad news as it reduces the import bill, but the main challenge is to use this opportunity to increase exports of the government.
The government has announced a number of incentives for the exporters, including a decrease in the gas prices as well as financial packages. However, value-addition remains the main challenge for the Pakistani exporters against competitors like Bangladesh and India.
The government needs to open talks with the exporters to draw a strategy to make their products more competitive against their rivals.
The present government, which took over just three months ago, and has largely been made up of people with no previous experience of holding public offices at the federal level, cannot be held responsible for the economic woes of the country.
Pakistan has been periodically facing these problems. Previous governments should be held responsible for the problems, but the current government needs to be clear about its direction and also clearly tell the people where it is heading to.
And while doing so the government needs to regularly take the parliament into confidence about its actions.
Rarely do both houses of the parliament hold any debate about the state of the economy, instead so far the debates have been restricted to blame-games. Useful and informative debate on technical and specialised matters like the economy and finance can be initiated in the parliament through house committees.
Unfortunately, the house committees have not been formed even after the passage of three months because of the deadlock between the government and opposition over the chairmanship of Public Accounts Committee.
The government needs to resolve these matters as quickly as possible so that the parliament can work effectively.
In the coming days, the government would need legislation to deal with the economic challenges. The parliamentary committees play crucial part in the formulation of bills that could be put before the parliament for approval.
Therefore, the government should try to break the deadlock in this regard. It also needs to bring down the political temperature inside and outside the parliament, and enlist cooperation from the opposition in resolving the problems faced by the country.
The government has a razor-thin majority in the parliament and there have been voices of dissent among some of its allies recently.
It is therefore now important for the government to reach out to the opposition as early as possible to create a congenial working environment in the parliament that could ultimately help it in implementing its agenda. Failing which, there could be more political chaos and unrest in the country.
The writer is a senior journalist based in Islamabad
