Pakistan currency appreciated by 2 percent in December 2013 , which is the fourth highest monthly appreciation of a local currency in last 30 years, said financial experts. It is interesting to note that only two years in the last thirty have witnessed appreciation of Pakistan rupee. A weak currency might be pleasing to the exporters or the overseas Pakistanis remitting their hard earned money in Pakistan but the overall impact of a weak rupee on the general prices and majority of population is extremely horrible as on one hand it opens the flood gates for price hike while on the other it erodes the purchase power of the common man. Besides that since Pakistan economy is heavily dependent on imports, what ever the gains on exports and remittances are washed away by the cost imports due to rupee devaluation. Although the Finance Minister Ishaq Dar has given assurance to take measures to arrest the free-fall of rupee against dollar yet the statement also calls for fiscal measures to achieve much sought after rupee stability. Once the financial experts manage to strengthen exchange rate, the prices of oil-based products especially the cost of transportation and power generation would come down to an affordable level. Hence, the first priority of the financial managers should be on exchange stability to give a respectable look at the ever weakening Pakistan rupee. One of the major reasons for devaluation of rupee is the fast depleting foreign exchange reserves of the country. For improving the foreign exchange reserves, the situation calls for taking all measures to trigger foreign inflows through economic and financial measures. According to current foreign exchange reserves position released by the State Bank of Pakistan , the total liquid foreign reserves held by the country stood at $8,526.3 million on December 13, 2013 . The break up of foreign reserves indicates that the State Bank of Pakistan reserves stood at $3,467.8 million while net foreign reserves held by banks (other than SBP stood at $5,058.5 million ) bringing the total liquid foreign reserves to $8,526.3 million . During the week ending December 13, 2013 , SBP’s liquid forex reserves increased by $505 million to $3,468 million compared to $2,963 million in the previous week. The increase in the Central Bank reserves is mainly attributed to $430 million inflows from multilateral and bilateral sources; which include $144 million from Department for International Development (DFID), $137 million from Islamic Development Bank (IDB) and $149 million accounted for receipts from other multilateral institutions. On account of external debt servicing and other official payments, SBP has made payments of $100 million from its reserves during the week ending December 13, 2013 . More inflows, including disbursement of the second tranche of Extended Fund Facility of around $550 million are expected in the coming days that would further augment the foreign exchange reserves of the country. In the current scenario, the people at the helm of affairs are required to win the confidence of the private sector, which has the capacity to bring back dollars deposited in the foreign banks. This has been done in other countries as well like Malaysia , Indonesia and even China not through administrative steps but winning over the confidence of the people through political stability and assurances as well as by setting examples. It is generally said that Pakistanis both within the country as well as abroad have enough wealth to take the national economy out of crisis by bringing back their money as the nation is in the need of their support. Although the target is difficult but can be achieved by taking reforms and remedial measures especially at the level of government functionaries at all levels for implementation of the reformative policies and offering incentives to the people who can bring back their money into Pakistan . A large number of overseas Pakistanis desire to come back to Pakistan but the conduct of the government functionaries right from entry point of the airports is so harsh and humiliating, which is sufficient to scare away even the people of Pakistan who desire to settle down in their homeland. Meanwhile, the average annual PKR/US$ devaluation has been 6.5 percent in the last 30 years. In this period spanning the last three decades, in only two years i.e. 2002 and 2003 in which the Pakistani rupee appreciation against US dollar. The 2002 and 2003 appreciation was in response to a liquidity shock, which drove interest rates to low single digit. In contrast, instances of sharp devaluations are not uncommon. In nine of the last thirty years, the PKR has fallen by more than 10 percent against the US$; a double-digit devaluation on average every three years. The other instances of more than 2 percent monthly appreciation were in October 2001 , November 2004 and November 2009 . It will be interesting to note that the average annual PKR/US$ devaluation has been 6.5 percent in the last 30-year. Of these, in only two years i.e. 2002 and 2003 has the PKR appreciated against the USD. In ten of the last thirty years, rupee has fallen by more than 10 percent against the dollar. It will be pertinent to mention that the recent reversal in Pakistan rupee fortunes has been on the basis on marginal improvement in foreign exchange reserves, yet there has been no major change in balance of payments outlook. The financial analysts, however, expect that the PKR/USD parity may reach 112 to US dollar by June 2014 in the absence of fundamental support for sustainable rupee appreciation. The financial experts feel that the reversal in fortunes of the PKR/US$ parity has been sharp and unexpected; witnessing a depreciation by 9 percent in the 5-month from July to November 2013 , it has gained 2 percent (interbank), and 4 percent (open-market) in the last two weeks. The situation has raised questions as to what has triggered the rally, and can it sustain? Actually, the reversal in course of the Pakistan currency follows on the heels of aggressive statements by the Finance Minister in support of the currency. This has been augmented by a marginal improvement in foreign exchange reserves as well, with a rise of $466 million to $8.5 billion in the week ending December 13, 2013 . The additional flows have come from Department of International Development (DFID) and Islamic Development Bank (IDB). IMF approval for the next trance of $553 million also came in late last night, and should have a positive impact on the currency market today. The recent currency appreciation has also resulted in considerable improvement of investor sentiment. This is the fourth highest monthly currency appreciation recorded in the last 30-year (a period of 360 months). The other instances of more than 2 percent monthly appreciation were in October 2001 , November 2004 , and November 2009 . Of these, October 2001 was the only time when the Pakistani rupee appreciation sustained for a few months, and that was in response to the liquidity influx post 9/11. The appreciation in November 2009 was driven by IMF loan approval, which gave immediate payment of $3 billion to Pakistan , rescuing it from a balance of payments crisis.
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