(Note: This promise tracking commenced in June 2013 and ended on October 2016)
Pakistan’s Federal Finance Minister, Ishaq Dar, had promised to rein in the soaring price of the US dollar back to 98 rupees (Rs) per dollar.
When Pakistan Muslim League-Nawaz assumed charge of the government in June 2013, the US dollar was priced at Rs 98. However, within six months of the PML-N Government, the value of the US dollar peaked at Rs 109 per dollar. The steep rise in the dollar exchange rate hit the Pakistani economy hard, leading to an unprecedented rise in the prices of essential everyday commodities.
To track the progress of the Finance Minister’s promise, Truth Tracker had contacted Shafqat Jalil, then Media Director of Pakistan’s Ministry of Finance, regarding the much-needed government plans to bring the dollar exchange rate down to the pre-budget level. (Jalil is now posted with President of Pakistan)
“Multiple plans are being devised at the moment to control the rising exchange rate of the US dollar,” Jalil had told Truth Tracker, noting that the government was hopeful about their success with these plans.
He had explained that the government is also expecting the World Bank and Asian Development Bank to provide a considerable amount in the fiscal year 2013-14, which would enable the government to overcome the currency crisis and boost foreign reserves. Additionally, Jalil said, “The government had reached an agreement with a consortium of banks for borrowing $625 million for oil payments and financing of the budget deficit.”
“The government has already received $200 million from the [banks] consortium and the remaining amount would be available as and when needed for oil payments,” Jalil said. “Some friendly countries would also provide soft loans and aid to Pakistan in the coming months,” he added.
Jalil had further explained that the dollar exchange rate could be easily brought down to Rs 98 if all the proposed measures were carried out as planned by the Finance Ministry and the government.
Pakistan Tehrik-e-Insaf leader and Member of National Assembly, Asad Umar, in 2013, had said that the government had devalued the rupee as per an agreement with the IMF.
“The situation (devaluation of rupee) has resulted in skyrocketing inflation and rampant unemployment,” Umar told Truth Tracker. “A fall of one rupee against the dollar costs 70 billion rupees to Pakistan’s economy,” he said, and noted that the country’s economy cannot be improved until the government takes steps to widen the tax net.
Umar had predicted that the government would not be able bring down the dollar exchange rate under the prevailing circumstances.
“This is the crucial moment for Pakistan’s economy, which can be improved only if the government creates a hospitable environment to encourage foreign investment in the country,” he added.
A leading economic expert, Dr Qais Aslam, said that the government cannot bring the dollar down to 98 rupees due to negative indicators, as there is a balance of the trade deficit which amounts up to 20 billion. In such a scenario, the price of the US dollar is likely to hike rather than coming down.
He added that it is not the domain of the Finance Minister Ishaq Dar to make such promises. “It was only a signal for his friends to buy and sell the US dollar in order to make billions of rupees through the dollar trade,” Aslam told Truth Tracker.
Aslam added that the finance minister made a similar statement in 2015, in which he promised to bring the dollar down to 85 rupees which only acted as a cue for his friends and businessmen involved in the dollar trade.
A leading economic expert, Sakib Sherani said that the US dollar exchange rate is directly linked to demand and supply, just like other commodities.
“Besides demand and supply, the dollar exchange rate is also linked to the country’s foreign reserves,” Sherani told Truth Tracker.
Sherani warned that Pakistan’s foreign reserves were continuously shrinking due to a balance of payment on account of trade, further elaborating: “With decreasing foreign reserves, the demand for the dollar is on the rise, leading to a sharp increase in the rate of the green buck against the Pakistani currency.”
Another noted economic expert and Dean of the Business School of the National University of Science and Technology, Dr. Ashfaq Hassan Khan, agrees with Sherani.
“The government cannot improve dollar-rupee parity unless a huge amount is injected into the national kitty through an influx of foreign investment,” Khan told Truth Tracker.
He said that foreign investment in Pakistan had almost shrunk to zero due to poor security and acts of terrorism. “It is not possible for the government to bring the dollar exchange rate down to the 2013 level of Rs 98,” Khan said. According to Khan, the government had an understanding with the International Monetary Fund (IMF) under the Extended Fund Facility Program that the Pakistani rupee would be allowed to depreciate until it reached Rs 110 against the US dollar. “It would be a major achievement even if the government succeeds in keeping the dollar rate at Rs 105…as bringing the rate down to Rs 98 is mere fantasy,” Khan said.
Truth Tracker closely monitored fluctuating rates of dollars against Pak Rupee and observed that US dollar’s exchange rate had started declining in March 2014 to April 2014 and reached 97.50 Rs/dollar. In May 2014, it again started going up and never came back to below Rs 100.
Considering the government’s position on the dollar exchange rate against the views presented by a lawmaker from an opposition party and independent economic experts, Truth Tracker rules that the PML-N has compromised the promise.