Pakistan Rupee sinks on concerns over balance of payments

[tarrar]

Both gadari party and ganja league are to be blamed for this economic terrorism against Pakistan. Gadari party set the platform & ganja league did the rest.

 

[GodToons]

As a currency depreciates, it weakens the purchasing power of that country...including its importers. So the general trend is a decline in imports.

The opposite happens for foreign importers...their currency now stands stronger comparatively...and hence the general trend is that exports of the country whose money got depreciated, increase.

Of course I could be wrong since I'm no expert and only going off of general trends. Could u perhaps shed more light on why the general trend wouldn't happen in this case?

Interesting question, but asked in wrong way. let put some facts around it w.r.t. to devaluation of currency

1. Foreign currency loans will increase in same %, inturn increase the interest component which will hit the reserve
2. Exports where foreign currency is involved will somehow get benefited, however local currency exports will take a massive hit
3. Imports prices will increase since Pak is consumer based economy and it imports commodities like oil, steel, medicine, infra machines, food items, even cars from other countries. No escape from increase in prices
4. To maintain substantial money fund, local banks will have to increase saving interest rate, will have to increase lending rate and hitting industrial activity making production costly

It is Domino effect in layman terms.
in case I am even explain information in ACCA way too.

 

[wiseone2]

Burden of debt denominated in foreign currency will increase.
If the loan is denominated in local currency, it become easier to pay off...

I assume most of pakistan's debt is denominated in foreign currency. Others can keep me honest here

 

[Nalini]

There are some more places much before this post, I have mentioned what's coming, don't recall where I posted. Anyway this is exactly the words mentioned in the post way back in Sept 2017.

Soon you will have a bomb of Inflation & devaluation. Your currency will slowly go out of control without FDI coming & all the above numbers reversing fast. PKR will cross 110 at the turn of 2018 for sure according to me. If it doesn't cross 115 by the turn 2019 you will be lucky. This will have severe impact on your cost of living. Your oil prices, basic daily needs, cooking oil prices are going to sky rocket in next 2-3 years.

https://defence.pk/pdf/threads/us-weighs-dropping-pakistan-as-an-ally.518266/page-5#post-9877317

Kindly read the post no. 67 in the link above. I have taken my time & effort many times reminding them, their economy is in crisis. I had told when PKR was trading @ 104/105 levels it will touch 110 by 2018 & 115 soon.

The forex reserves is fast depleting & there will be heavy pressure on your currency when you have to repay loans or delay oil & other import payments. You will again have to pay interest & penalty. Let us see if Pakistan is able to keep the currency at 115 or I will again come right.

It's time you shed your ego & give up India hatred & Kashmir to bring some ray of hope. It's already late.

 

[Novice09]

There are some more places much before this post, I have mentioned what's coming, don't recall where I posted. Anyway this is exactly the words mentioned in the post way back in Sept 2017.

Soon you will have a bomb of Inflation & devaluation. Your currency will slowly go out of control without FDI coming & all the above numbers reversing fast. PKR will cross 110 at the turn of 2018 for sure according to me. If it doesn't cross 115 by the turn 2019 you will be lucky. This will have severe impact on your cost of living. Your oil prices, basic daily needs, cooking oil prices are going to sky rocket in next 2-3 years.

https://defence.pk/pdf/threads/us-weighs-dropping-pakistan-as-an-ally.518266/page-5#post-9877317

Kindly read the post no. 67 in the link above. I have taken my time & effort many times reminding them, their economy is in crisis. I had told when PKR was trading @ 104/105 levels it will touch 110 by 2018 & 115 soon.

The forex reserves is fast depleting & there will be heavy pressure on your currency when you have to repay loans or delay oil & other import payments. You will again have to pay interest & penalty. Let us see if Pakistan is able to keep the currency at 115 or I will again come right.

It's time you shed your ego & give up India hatred & Kashmir to bring some ray of hope. It's already late.

They are beating the drum of CPEC... But they dont understand the gravity of being on one side only... initially they were all out for US now it is China...

While Indian economy is reaping the benefits of giving MFN status to Pak... Pak is reluctant to have business relations with India... There internal security and political situation is a mess... Corruption levels are very high... political and mililatry elite is not answerable to the nation...

They need a big overhaul to stabalize... otherwise exonomic warfare is on and China or India will emerge victorious... Pak will lose for sure...

 

[TopCat]

It was long overdue.. good for the economy.

 

[Skull and Bones]

It was long overdue.. good for the economy.

Not, if the import is almost double of export.

 

[TopCat]

Not, if the import is almost double of export.

It will reduce import and encourage local produce.
I will impose tax on imported cars, electronics, luxury items on top of costly dollar.

 

[comfortably_numb]

^Import substitution in an already protectionist economy is a recipe for disaster impeding growth rate, decreasing efficiency and the quality of manufactured goods, further depleting forex reserves. It is simply not feasible for a country neck-deep in debts with negligible manufacturing base.

 

[Skull and Bones]

It will reduce import and encourage local produce.
I will impose tax on imported cars, electronics, luxury items on top of costly dollar.

Local production requires infrastructure, which they lacks tremendously and will need at least 4-5 years to build, and even for that, they will needs loan from external sources.

^Import substitution in an already protectionist economy is a recipe for disaster impeding growth rate, decreasing efficiency and the quality of manufactured goods, further depleting forex reserves. It is simply not feasible for a country neck-deep in debts with negligible manufacturing base.

Quality will be the last thing they should be thinking about now.

 

[TopCat]

Local production requires infrastructure, which they lacks tremendously and will need at least 4-5 years to build, and even for that, they will needs loan from external sources.

Till then they should stop using the non essential commodity.

^Import substitution in an already protectionist economy is a recipe for disaster impeding growth rate, decreasing efficiency and the quality of manufactured goods, further depleting forex reserves. It is simply not feasible for a country neck-deep in debts with negligible manufacturing base.

Not really if you use it prudently. Motorbike and Home Electronics are flourishing in Bangladesh with right tariff incentives. We opened it first to create market, and now squeezing it to make the importer to produce locally. It worked like miracle.

 

[comfortably_numb]

Local production requires infrastructure, which they lacks tremendously and will need at least 4-5 years to build, and even for that, they will needs loan from external sources.



Quality will be the last thing they should be thinking about now.

Agreed. And to top it all the fiscal deficit for the preceding year stands at a whooping 6.3% of GDP. Pakistan simply cannot afford to provide any more subsidy than it currently offers to kick start domestic manufacturing of that scale.

 

[Skull and Bones]

Till then they should stop using the non essential commodity.

How can you stop local population using things they are willing to pay for, without going Venezuelan way?

 

[El Sidd]

Baniye ki tharak check karo is thread me....

Diwaalia hamara nikal raha ha or kapre ye aye apne phaar rahe hai

Wah qudrat tera bhi kia asool...

 

[bafxet]

It was long overdue.. good for the economy.

Good in what respect?