Speculators turn

LAHORE: Speculators and manipulators play havoc with economies where regulators are weak and government writ is absent as happened with rupee and prices in recent months.

Ishaq Dar is trying to establish the writ

of the state over these manipulators and

speculators that have tarnished the perception of the country. Rupee did lose its value against the dollar because of our bad economic policies, but more than that our currency provided an avenue of making big money.

When you spread the perception that the economy of Pakistan is doomed, and the rupee would continue to go down; people start converting the local currency into dollars.

More dollars go into private hands creating a shortage of greenback for the importers.

When the government remains a silent spectator, the exporters also hold back their export proceeds longer than permitted limit so that they get maximum benefit when their export proceeds are converted into rupees. The unlawful trade of currency also accelerates when many businessmen ask the hundi and hawala operators to convert their rupees into dollars and transfer them at the destination they desire.

Under these circumstances, it is impossible for any government to keep the rupee stable.

The central bank may intervene for a while to throw dollars in the open market to protect rupee value, but when the foreign exchange reserves are very low, the ability of the central bank to intervene is weakened.

There are billions of dollars that are regularly transferred through illegal means to finance under-invoicing by the importers. Look at the difference between the Chinese exports to Pakistan as they officially reveal and Pakistan’s import from China which we officially document.

The difference is around $6 billion. Our importers pay Chinese exporters this amount to import goods to Pakistan at much lower than the actual value. China is not the only country from which we import taxable goods at lower value.

The practice is prevalent everywhere. In countries where the original supplier refuses under-invoicing the goods are purchased by a third party (mostly the proxy of Pakistani importer) and shipped to Pakistan at desired value.

Dar, like most businessmen in this country, knows the practices prevalent in the market to play with the value of the rupee. The current decline in dollar value against the rupee is only because of the perception that Dar is a hard task master.

He has not yet taken any action against major players that manipulated the Pakistani currency to mint billions of rupees. He has pointed out the role of the banks in this regard, but these banks have not been penalised by the central bank.

Only one small hundi dealer has been apprehended, while there are hundreds of such operators in the country. They have regular clients in the shape of overseas Pakistanis from whom they collect dollars on a monthly basis, and then pay their near and dear ones in Pakistan through local bank transfer or pay those people cash at their homes. It is a mafia that would require constant vigilance and efforts to break.

The Pakistani rupee is not as weak as the public has been made to perceive. Dar does not need a magic wand, but only a realistic approach to break the nexuses between businessmen, speculators, and manipulators.

Strict vigilance would ensure the rupee settles at its realistic value. The prices would ultimately go down and so would the inflation and interest rates.