Currency fluctuations

Minister of Information Fawad Chaudhry has said that the fluctuation in the rate of dollar does not make any difference. Earlier, Finance Minister Asad Umar had assured the nation that the current situation will improve in a few months and that the government is actively working to resolve the crisis. It is true that a nation needs to have a relatively stable currency to attract foreign investments. Otherwise, the prospect of exchange losses inflicted by currency depreciation may deter foreign investors. A devalued currency can result in imported inflation for the countries that are substantial importers. A sudden decline of 20 percent in the domestic currency may result in imported products costing 25 percent more – since a 20 percent decrease means a 25 percent increase to get back to original price point. Persistent foreign exchange fluctuations cause uncertainty and have negative implications for the economy. Therefore, saying that such fluctuation “doesn’t make a difference” is an uninformed opinion.

Dr Najeeb A Khan

Islamabad