Rupee appreciation without much foreign exchange inflows shows that most of the pressure on our currency came from speculators. The government must identify and eliminate them from playing havoc with our economy.
Rupee appreciation without much foreign exchange inflows shows that most of the pressure on our currency came from speculators. The government must identify and eliminate them from playing havoc with our economy.
New foreign exchange laws mandate that the sellers and buyers of dollars must register their computerised identity card number. The list of those who bought dollars for selling must be available with the forex dealers and banks.
That list must be scrutinised to identify those that sold over $5,000 since August 3, 2022. They must be confronted and asked to justify that accumulation. Leading forex dealers claimed that around $4 billion was hoarded by unscrupulous elements after the change of government about four months back.
The rupee was already under pressure as the IMF had withheld its programme. The process was accelerated when speculators started accumulating dollars, the exporters began withholding export proceeds and families with extra money started converting them into dollars.
If the rules were followed, each transaction must have left the trail of the buyers. If the record was not properly maintained by dealers or banks, they should be heavily fined or their licenses cancelled.
We cannot simply let speculators play havoc with our economy. The condition of CNIC of buyer or seller was incorporated to keep the trace of those dealing in dollars. Now the state should benefit from this condition.
Now we all know that the rupee was grossly undervalued. It caused an unusual hike in prices; it increased our fiscal deficit as foreign debt servicing amount increased in rupee terms.
It forced our security imports to a lower level as the budget allocated in rupee could not finance the planned imports. Foreign travel that was already expensive became nonviable as the rupee shot up from Rs189 to Rs240 in less than four months.
Parents who financed their children’s foreign studies had to borrow to send the fee abroad. Imports halted and caused shortages of numerous items.
All this happened because of speculative culture in the country.
Our planners are generally lethargic in benefitting from authentic data. Speculators continue to rule our capital market.
The pattern of trading if properly studied would reveal the winners and losers in the ups and downs of the market. Data shows that the winners are always a selected group of brokers or individuals, and losers are always the small traders.
Manipulative trading to lure the small traders or to frighten them can be easily traced through the record available with the capital market regulator.
At the import stage, our authorities rely on the documents provided by the importers to ascertain the import price instead of checking the actual price of each item, component, or product through the internet.
They could then at least apply the average price of import for determination of duties. The rent seeking mafia is not interested in generating higher revenues for the state.
Pakistani authorities are sitting on a huge amount of data that could propel the country to a new era of development and growth. But using that data would deprive them of regular rent they generate for themselves.
– The writer is a staff member
