‘Rupee slide will boost growth of Pakistan over the long term’

MUSCAT: The falling Pakistani rupee (PKR) will pose short-term challenges but offer long-term benefits to the country, according to a senior economist and adviser to Oman’s Ministry of Finance.

“The Government of Pakistan has allowed the devaluation of currency after maintaining the Pakistani rupee’s parity to the US dollar since the middle of 2015. This was perhaps a deliberate policy to ensure import inflation was kept under control while Pakistan was importing machinery to improve its industrial capacity.

“Pakistan has increased its power-generation capacity in the last four years and significantly reduced its power shortages, which had inhabited industrial growth,” stated Hamid Hamirani, adviser to the Sultanate’s Ministry of Finance.

Good for exports

He added that the devaluation will be welcomed by exporters as it will make them competitive, enhance profits, and perhaps some of these profits will be shared with workers in the form of wages, resulting in increased consumption. “The devaluation will also be positive for foreign direct income and remittances for Pakistanis working overseas,” he noted.

Forecast

With the rupee touching a record low, industry executives believe that the time has come for Pakistanis to start sending money home. However, they also forecast further depreciation of the rupee, but not as steeply as witnessed over the last three weeks.

“Now is a good time for Pakistani expats to start sending money home, as it will get them more PKR per Omani rial. We expect the depreciation to continue for some time, but the pace could be slower,” noted a spokesman of the Oman UAE Exchange.

The PKR continues facing ongoing depreciation against the US dollar after a 5 per cent downward adjustment last month.

It has also given Pakistanis the opportunity to cash in on the declining value of their currency by remitting more.

Mechanisms

Pakistani housewife Hifza Junejo remarked, “Honestly, I don’t understand the mechanisms used in calculating the value of currency. All I know is that my family will be withdrawing more PKR against the same amount I had transferred in the past.

“Over the years, depreciation in PKR has saved us a fortune. When I initially moved to Muscat in 2015, I would transfer a specific amount to my bank in Lahore as savings. I then began to realise a pattern in the conversion rate and stopped transferring every month. I would wait for the rate to fluctuate so that I could get more PKR against the same amount of Omani rials I transferred every month.”

Remittances

“With respect to remittances, the volume has not gone up on account of the recent rupee slide,” noted Syed Faraz Ahmed, general manager at the Oman United Exchange.

“Also, irrespective of the currency rate, expatriates need to send money home for family maintenance. Hence, they might take advantage and send more money home,” he added.