Summary
Foreign exchange rate, its stability and predictability holds critical importance in the international trade of any country. Pakistani Rupee is volatile. Pakistan’s experiments with various exchange rate policies in the past have also fed into this uncertainty. Adding to that, these policies are inconsistently adhered to and frequently withdrawn.
Studies in Pakistan are mostly limited to understanding the implications of exchange rate on macroeconomic performance of the country, like GDP growth and current account balance. In this analysis, we focus on businesses. As Pakistani rupee has remained stable around Rs. 104 per dollar during the last 12 months, it is important to highlight what new patterns it has created in Pakistani businesses and how these patterns can potentially affect our exchange rate policy options in the future.
We begin with a brief overview of Pakistani exchange rate policies in the past and present in section I. Section II highlights how SBP has intervened in the forex market during past few years since 2013 and what results it has produced.
Finally, in section III we present changing business patterns due to a stable Pakistani rupee and how it has affected business in the economy. Based on this, will rupee remain a stable currency” in the future is also analyzed from the perspective of private business.
