Pakistan and the inevitable dollar flight



The threat of dollar depletion will persist even if short-term solutions like IMF bailouts are successfully negotiated.

It is critical that we comprehend the best ways to address this growing problem as the rupee continues to depreciate against the dollar. But to achieve that, one needs to have a fundamental understanding of the current economic situation Pakistan is in.

Like every other market for products and services, the market where the dollar is traded operates similarly. Demand and supply are the guiding principles here. The limited amount of dollars that are held by market participants gain value when demand for the dollar rises. As a result, the value of the dollar increases. When the supply of dollars is reduced, the dollar will inevitably begin to depreciate.

But why is the devaluation of the dollar inevitable? Why is it so difficult to stop or even bring it down against the rupee? It is simple to demonstrate why it is crucial to inject as many dollars into the market as are required in order to maintain the dollar's price stability by referring once more to the demand and supply theory. However, there is only one method to reduce the value of the dollar relative to the rupee: by increasing the market's supply of dollars beyond the level of demand.

The market's dollar supply, however, cannot be arbitrarily expanded. The State Bank of Pakistan runs the risk of boosting the market's money supply, which will lead to inflation, if it prints more rupees to buy more dollars. So how can Pakistan successfully boost its currency supply to meet demand? The solution is simple: boost exports, boost remittances, limit imports, concentrate on ending a debt-driven economy, and find alternative sources for purchasing things at lower prices.



It takes time and systematic global competitiveness development for a nation to increase the supply of dollars. Without a concerted national focus and priority on research and development, this is not conceivable.

Equal amounts of dollars must be provided into the market as and when demand emerges if the goal is to maintain the dollar's value relative to the rupee. Using debts from numerous sources is another way to accomplish this. However, if the objective is to lower the value of the dollar so that it is equal to the value of the rupee, the state must develop the nation's economy to the point where the value of the rupee is determined by the health of the economy.


It is crucial to emphasise the areas where public-private investments will result in long-term benefits like as growth, higher employment, and increased cash supply.

The long-term threat of dollar depletion will persist even if short-term measures like the International Monetary Fund (IMF) bailouts are successfully negotiated. The increase in the cost of critical fuels won't have any effect on anyone in the ruling class, in actuality. Not the Sharifs, the Zardaris, the Khans, Miftah Ismail, the Sharifs, etc. The state's inability to protect its citizens' interests will again be primarily felt by common folks.

The government must make investments that strengthen and stabilize the economy if it wants to raise the money supply and spare us from this catastrophe. Only if the end goal is to maintain global competitiveness will this be successful.

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