Pakistani currency is dependent on the rate of the dollar, its fluctuation in the international market makes the rate of the rupee unstable. Every country has some reserve in its bank on the basis of which it does trade, this reserve may include gold or oil, or any other valuable item that the country owns In Pakistan just like the rest of the world, the dollar is the currency used for trading globally, and its stability depends on the international market which changes time to time.
There are external and internal factors that can contribute to the appreciation of the rupee in comparison to the dollar.
Reason for comparison of currency
It’s a strange thing because every currency is compared to the dollar. Maybe it’s related to the trade? You can state this aspect in a way that countries always trade in pairs and so do their currencies because each currency’s value must be compared to another currency in order to determine its exchange rate, currencies are always traded in pairs. For historical reasons, the majority of currencies have been traded largely against the U.S. Dollar.
Current account deficit
According to data released by the State Bank of Pakistan (SBP) on Wednesday, the country’s CAD increased to USD 17.406 billion in FY22 from barely USD 2.82 billion in FY21.
When the value of imports (of goods, services, and income) exceeds the value of exports, a current account deficit results. A current account deficit can be reduced by:
- Supply-side initiatives to boost the export and domestic industry’s competitiveness
- Reduce spending on imports and domestic consumption (for example, by strict fiscal policies and increased taxes).
- depreciation of the currency (make exports cheaper – imports more expensive)
Pakistan’s current export policy
For the rupee to appreciate in value relative to the dollar, Pakistan must rethink its current export policy. It is well known that Pakistan is an agricultural nation, with agriculture accounting for the majority of its exports. Money draws everyone in the same way that nectar attracts bees, thus means to produce money should become legal to improve the rupee. Everyone wants to live in a decent house and drive a luxurious automobile, but this can only happen if a person makes above $2,000 per month.
E-business promotion in Pakistan
Both internationally and in Pakistan, e-business is highly valued. Today, digital marketing is also a type of e-business. We don’t need to go into great detail about this side of the topic because we are all familiar with freelancing and how it works. Well, the fact that e-business helps Pakistan get remittances from abroad is why it is so highly valued today. If the dollar enters the country, remittances will increase and the rupee will become more stable.
Yes, this is how it works; we all have that one friend who works at a call center and makes a dollar there. E-business expansion always relates to stability.
The open policy of the state bank
If we offer open regulations to the world market, investors will be more inclined to invest in Pakistan, hence the State Bank’s current policy should be somewhat modified. PayPal and other companies will establish offices in Pakistan. However, Pakistan’s state bank’s rigid restrictions prevent it from ever having the opportunity to penetrate a sizable foreign market.
University of South Asia
The USA has made an effort to equip its graduates with skills. This is being done to encourage students to create side businesses. Students can work part-time for foreign clients and earn money; as we’ve already stated, this will make the country more stable.
