For the past one year, Ishaq Dar has squandered Pakistan’s good credit standing to issue billions of dollar bond to prop up rupee against US Dollar as opposed to raising fund for expanding the economy. Independent economists and IMF has consistently predicted that Pak Rupee is overvalued and its true market value is somewhere close to Rs. 130 per USD.
The State Bank of Pakistan has consistently denied logical economic reasoning and has blown away 18 Billion USD to support the Rupee, as we can see the abnormally smooth day to day dollar rate curve in the image. In the end, after crippling Pakistan’s exports to mere 20 billion USD per year and bringing the forex reserve down to only 2 months of import, the Rupee has finally limped to its true market value today at the rate of 130 Rupees per dollar, just as forecasted by the economists of different spectrum. From being the best performing currency in Asia in 2015 to being the worst performing Asian currency in a span of 36 months, Pakistan has clearly demonstrated to the world that market forces ruthlessly prevail, no matter how much we try to micromanage it.
Today Bangladesh Taka is grossly overvalued at 83.75 Taka per dollar, whereas the true value is closer to 95 Taka per Dollar. The external deficit has already widened by a record 10 Billion USD in 10 months of fiscal year. Unless the policymakers doesn’t allow Taka to float freely in the market, Bangladesh economy is doomed to a fate far worse than Pakistan’s plight. After all, Pakistan has a comparatively bigger internal market to cushion falling exports while Bangladesh is too dependant on export to price sensitive EU/US markets.
Shaadmaan Siddiqui is a student at IBA, University of Dhaka.