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ISLAMABAD (May 10 2008): Downslide in Pak rupee value has added Rs 270 billion (roughly $4 billion) in Pakistan's public debt in the last 40 days, besides making the oil imports more costly and, if this trend of currency depreciation continued, the damage to the economy might be unmanageable.

Sources said that the economic team of the government remained busy in Islamabad for hours on Friday to find out some solution to the ongoing money crisis as a result of the nosedive of Pak rupee against US dollar, but by the end of the day-long consultation result was zero.

A senior official who was the part of Friday's series of meetings held in Finance Ministry, said: "We have spent the whole day in finding out a solution to dollar-rupee exchange rate that is showing disturbing trend over the last couple of weeks, but there seemed no quick end to what can be seen as a major devaluation in the currency in the recent years. The devaluation of Pak rupee is a failure of the fiscal policy."

Even the government's economic managers looked confused over the role of the State Bank of Pakistan (SBP) in managing the rupee-dollar exchange rate. They were of the view that SBP did not act timely, and wisely, to seize the downslide of rupee.

Pak rupee exchange rate vis-a-vis US dollar has reduced by Rs 5 plus during the last 40 days. Dollar strengthened its position against rupee between April 1 and May 9. One percent dip in rupee value vis-à-vis dollar adds Rs 60 billion in Pakistan public debt.

US dollar-Pak rupee exchange rate was ranging between 1:61 and 1: 62 by the end of March, but in April the rupee started to weaken. However, devaluation was not so massive, and its impact on imports and other things was not felt so badly.

However, from the third week of April to May 9, the dollar showed massive gain against rupee, creating a crisis-like situation both in the interbank market and the open money market. SBP took strict measures to seize downward trend in rupee but it seemed too late.

The downward slide also created panic among importers who were making every possible efforts for early opening of the LCs for their orders. Contrary to importers' approach, exporters were not willing to bring their money back into Pakistan. This was widening demand and supply of the currency in the money market.

Devaluation of rupee has cost Pakistan very dearly. Now, for each barrel of oil, Pakistan's exchange rate will be 125 multiplied by Rs 68 against Rs 62 of last month. The increase done by the government in oil prices has gone in vain due to the massive devaluation of Pak rupee.

Copyright Business Recorder, 2008