Monday, January 18, 2021

Why is the Rupee Plunging Ahead of Elections in Pakistan?

Elections in Pakistan are just a few days away but troubles in Pakistan do not seem to be ending. Amid the highly melodramatic political drama in Pakistan ahead of the elections, the Pakistani currency plummeted on Monday. In comparison to the dollar, the Pakistani Rupee slid more than 4.5%. Pakistani Rupee closed at PKR 128 on Monday as it tumbled right ahead of the elections.  

Pakistan is on the verge of a foreign currency crisis and the new government that comes to power post elections will have no choice but to seek a bailout from the IMF. In the recent months, declining exports and enhanced imports have made the foreign reserves of Pakistan plunge badly. The forex reserves have come down crashing to $9.5 billion hence triggering an economic crisis. This is not even enough to cover two months of imports.

Policymakers in Pakistan have deliberately allowed the Pakistani currency to fall by 20% against the dollar. This approach was adopted to manage the intensifying problem of balance of payments.

The latest slide in Pakistani Rupee came partially after Nawaz Sharif and daughter Maryam appealed their conviction in the corruption case. Both Nawaz Sharif and Maryam are lodged in Lahore jail. They were arrested on their return to Pakistan on July 13 from London after convictions in a corruption case. They have been charged for properties they had no account of. Former ousted PM, Nawaz Sharif, daughter Maryam and son in law have approached the Islamabad Court seeking a reversal of verdict that found them guilty and hence convicted.

Economic experts in Pakistan believe that economy has become an immediate problem that Pakistan needs to address. The new government will need to take tough and decisive measures as per economic experts.   No matter who wins the elections in Pakistan but the new government will face a massive challenge to stabilise the economy of Pakistan which is shaping up pretty bad day by day.

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