A tug of war: dollar vs rupee

Hassnain Javed

JULY 11, 2019

Before addressing the dilemma of rupee fluctuation it is important to understand the dynamic mechanism that how currencies devalue and fluctuate so often. There are around 195 countries residing on planet earth with 180 currencies in total that have a daily day in and day out. In addition, as life continues and carry on twenty-four hours a day irrespective of any sudden or planned to occur with one of it’s after effect on the currency fluctuations. Some economies, which are considerably powerful and stable have fewer chances of currency fluctuations in contrast to the emerging or weak economies that can easily get affected with any slightest of changes in their respective immunity level. Moreover, some currencies are widely used as a medium of exchange in comparison to the rest of the available currencies. This explains the phenomena that other people for their respective use accept the more certain currency as a medium of exchange it is likely that quicker it gets adaptable. However, it should be a stable currency and have minor or no fluctuations. For instance, if you are on some business trip with carrying currency that is devaluing every passing day will end up having no purchasing power.

Besides this, most of the world currency trading business operates on the rationale of demand and supply thus an implication of the flexible exchange rate rather than the fixed exchange rate. This rationale refers to basic market mechanism phenomena as there is a shortage of certain currency in the market it will make the price of the currency higher and vice versa. The currency market operations are similar to the product market as the prices of the products increase the quantity demanded of those products will go down. However, while having currencies into consideration unlike products, a currency’s flow of demand and supply is complexly interlinked with certain factors such as country’s monetary policy set by its Central bank, rate of inflation and most importantly the economic condition of the country.

It is becoming difficult for the Pakistan masses with the majority of them unfamiliar with the world of finance or either how it does operate to figure out the rationale of falling rupee against the dollar. Indeed, it is a government obligation to make a common man who is paying taxes

The way Rupee has been falling in Pakistan against the Dollar, common people neither understands nor wants to know as to why it is happening, panic is being created. In addition, very justifiably so because a common person’s job is not to start studying how the world of finance works. It is the job of the government to ensure that a common tax paying man lives happily without extra burden. Yes, I am addressing the common citizens paying taxes. It is a grey reality yet the truth remains valid that countries with a high amount of fair and timely tax collection the currency of that particular country remains stable and stronger. Because tax revenue is the most important income which the governments possess. Therefore, more income a country have there would be more currency and economic stability. Likewise, the government will have more money to buy and keep foreign exchange in its Federal Reserve or either Central Banks so if there is demand creation for a foreign currency rises, the government can easily intervene and provide a supply of that currency to the buyers. If we have a quick glance at the South Asian region, Pakistan is ranked among the lowest tax to GDP ratio. This actually reflects whether the economy is in good or worse condition. Amongst the many factors low the amount of tax collection there would be a weaker economy that translates into devaluation of the currency.

It is quandary that innocent keep on getting into fools trap and those with awareness and equipped knowledge for the sake of monetary gains keep their mouth shut rather than doing something for their nation

As I always mention an economic function is synonymous to the human body structuring and functioning. The stronger the human body immune the higher energy and capability it posses to fight with any sort of diseases. In contrast, the weak immune may not even resist the slightest of viral infection and can suffer from fatal or either chronic consequences. Likewise, an economic situation depicts the immunity level as they contract any certain bacteria they are required to visit the doctor for help such as in the case of Pakistan with the turbulent situation they are seeking aid from international agencies. As the doctors get aware of the patient situation they provide medication but generally of higher potency.

If an economy is experiencing falling exports, rising imports, current account deficit, booming inflation, deteriorating currency, widening budget deficit, high rates of unemployment and tax evasion etc clearly indicates a hurricane warning bells ringing which can hit it anytime soon with devasting after effects. The medium to extreme symbols are evident yet there are very slightest of precautionary measures undertaken to mention the few the level of our exports never grew, no corrective action is taken to address the budget deficit indeed still wandering the cliff level is high enough that tsunami can never surpass it.

My heart bleeds to write bitter some realities that my beloved nation is undergoing since long. Pakistan always stays under the ambit of ad-hoc policies and never actually practiced the structural reforms in general irrespective of democratic or either military regimes. Our rulers have always treated the economic immune temporarily to survive rather than making an effort to build it strong enough and life sustainable. It is quandary that innocent keep on getting into fools trap and those with awareness and equipped knowledge for the sake of monetary gains keep their mouth shut rather than doing something for their nation.

In order to conclude, we the common man of Pakistan have to collectively raise our voices and make the uninformed participants informed about the bitter realities. To overcome the tsunami and corrective actionreforms are required. A step has to be taken today to bring revolutionary changes in decades to come.

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