First of all, it is all about dollars. The dollar in interbank is for rupees 226 and open market is 265 rupees. The banks are buying dollars from the open market to serve their credit card customers. The dollar is still around 23 index points off from its actual disposition. In my opinion, a series of events led to the failure of Ishaq Dar to maintain the value of the Pakistani rupee at a stable level and address economic issues as he had done in the past.
There were a series of events that contributed to the economic challenges faced by Pakistan and the inability of the Finance Minister, Ishaq Dar, to address them effectively. The SBP Amendment Act gave the central bank control over currency policy and the IMF has pressured Pakistan to maintain a market-based exchange rate. Dar’s attempts to intervene in currency markets and maintain the value of the rupee were unsuccessful due to the independence of the central bank and negative market perceptions of his actions.
The effects of severe floods in Pakistan also constrained the government’s fiscal space. Dar tried to use this situation to negotiate with the IMF and seek support from other countries, but this plan did not succeed. Instead of following IMF guidelines, Dar continued to push for his own agenda, causing delays in the program and further destabilizing the economy. His aggressive approach and public statements, such as his claim that he did not care if the IMF did not provide funding, contributed to market concerns about a potential default. Inflation and reserves declined, and Dar attempted to shift blame for these issues onto others, including the former Minister of Finance, Dr. Miftah Ismail.
The infighting and lack of decisive action, coupled with the IMF’s holiday break and negative economic indicators, increased chaos and uncertainty in the economy. The government is now seeking financial assistance from China, the UAE, and Saudi Arabia, but these efforts may be complicated by changing circumstances in these countries. It is hoped that Dar will cooperate with the IMF and work to stabilize the economy.
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