As American Dollar governs today’s capitalist markets, every Pakistani Government should focus on how to reduce the worth of Dollars against the Pakistani rupee. Fluctuations in an open market are normal. The overall trend is for the rupee to gain against the dollar these days. The question is why has the Pakistani rupee been appreciating against the dollar in recent times?

When Dollar went down during the past couple of months, the cost of living still depended on PKR. The import bill did improve though. The real question a month ago was whether should the prices ever go down when the dollar loses its value against the rupee. If $ goes higher, even if you are earning more in numbers you have to pay more due to increased inflation.

Well for the first, US election uncertainty was the reason PKR gain some strength. The world knows the Pak economy is driving in the opposite direction if we compare it to other countries in the region. The lower and middle-class people in Pakistan are the worst sufferers of increasing inflation. Govt claims that the Sugar price is 80 PKR per KG while on the other hand there is 110 per KG in my home town. Besides, there is no sugar available in utility stores.

How did Bangladesh Takka become more Economically Stable?

The State Bank of Pakistan raised its benchmark interest rate to 12.25 percent in an attempt to curb rising inflation amid a weak rupee and an elevated fiscal deficit. And with the present finance bill, all the government on the behest of the IMF has done has pushed the economy towards further cash transactions and hindered formalizing the economy. The interest rate in Pakistan was at a record low of 5.75 percent in May of 2016. This is why businesses flourished in the last 4-5 years and investments were being done creating new opportunities for Pakistan.

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An estimate of M0, M1, M2, and M3 Money in Pakistan

As a general rule of thumb every 7% increase in the inflation rate doubles the total amount of money in existence every 10 years. At 14% it would be 4x the original amount in 10 years. KIBOR went up from 5.75% (a record low in the history of Pakistan) in May 2016 to 12.25% as of today. More than double the increase in the last two years. The way I see it is that the Government is trying to incentivize people to hold their reserves in the banks or in bonds instead of in gold or other solid assets etc. On one hand, this is not good for the industrial sector and companies since their stocks will tank as people sell stocks and buy bonds, etc but on the other hand, the government wants to strengthen the rupee since the current inflation rate of 8.25% can still devalue the currency and lead to hyperinflation if not handled properly.

Today:

1 USD = 89.55 Bangladeshi Taka
1 USD ~ 198.87 Pakistani rupee

Why? Because we could not do three things the right way much as Bangladesh did:

1) Bangladesh got rid of the Army

For Bangladesh Takka to grow, the two biggest earners were textile and money sent back by the ex-pat workers. Even our countrymen set their Textiles in Bangladesh owing to law and order. The men in Saudia and the Middle East have been replaced by Bengalis with the same positive non-violent image they portrayed to the world. BD neither has any fertile political landscape nor do they face existential threats owing to their location. There was no interference/distraction etc by any other country and India looked after it in how the country is run. Bangladesh shares land borders with India and Myanmar only, former has successfully turned Bangladesh into its satellite state.

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Bangladesh doesn’t have enemies but Pakistan has

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