Tag: flexible mechanism
Is the rupee’s depreciation to record lows against the dollar justifiable?
The Pakistani rupee slumped to record lows against US currency by the end of September, despite growing foreign exchange reserves and increased economic activity. The State Bank of Pakistan (SBP) allowed the rapid rupee depreciation, unleashing uncertainty in the markets, hurting investment and business sentiment and increasing the country’s mountain of debt without any fresh borrowing. Is SBP’s inaction amidst the falling rupee the right policy?