Pakistan invests $5Billion to stabilize Pakistani Rupee against US Dollar.The State Bank of Pakistan (SBP) has bought more than $5 billion from the interbank market this fiscal year. This step has kept the forex reserves of Pakistan stable at $8 billions and also contributed to keep the Pkr stable at 278/$ reported by Express Tribune.
The central bank of Pakistan tried to prevent reserves falling below $3 billion due to the lack of foreign loans.While the exact size of purchases are undisclosed. greenback buyouts exceed $5 billion and are still ongoing. Critics opine that this has led to an undervalued rupee and made inflation worse. They propose allowing the PKR to appreciate which could ease inflation and interest rates.
Reportedly, authorities defend the actions of the State Bank of Pakistan (SBP) as necessary to prevent a recurrence of previous reserve crises. Right now the dollar purchase has supported the foreign exchange but this amount is only sufficient to cover up 1.4 months of total imports
Officials say the Real Effective Exchange Rate (REER) shows the rupee isn’t undervalued, but experts disagree. Some suggest boosting the rupee by 20% to tackle economic issues better.
Will this step makes PKR strong in the long Run:
The answer is no. Inorder to gain economic growth in long run Pakistan needs to make its expenses low. Just taking this action won’t make the Pakistani Rupee stronger for a long time. Pakistan has to spend less money in various sectors like military and many more. It’s important to stop living luxuriously with borrowed money to ensure financial stability. The elites of Pakistan enjoy luxurious life with the debts amount taken from different financial institutes according to a report Economic privileges accorded to Pakistan’s elite groups, including the corporate sector, feudal landlords, the political class and the country’s powerful military, add up to an estimated $17.4bn, or roughly 6 percent of the country’s economy, a new United Nations report has found.
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