Overvalued rupee

Ever since Ishaq Dar reclaimed the post of finance minister he has been trying to talk-up the value of the Pakistani rupee. Dar is on record saying that, as per his calculations, the actual value of the rupee is below Rs200 per US dollar. However, the market seems to indicate that, if anything, the rupee is overvalued. According to reports, importers are facing difficulties in obtaining opening letters of credit due to a shortage of dollars in the banks and travellers who need dollars for their overseas journeys are complaining about scarcity of dollars in the open market.

It appears that the PDM coalition wants to avoid correctly valuing the rupee for political reasons. In its attempts to keep the rupee above market value, the government has imposed curbs on importers and banks, causing great damage to the economy. This policy hampers the development of our export sector, which would benefit from a cheaper rupee. Furthermore, the overvalued rupee is dampening FDI and remittances by making local assets costlier than they should be. Therefore, I would suggest that the government review its exchange rate policy and let market forces decide the value of the rupee.

Ejaz Ahmad Magoon

Doha

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