During the last fiscal year, 2011-12, the rupee lost over nine percent versus dollar owing to payment of dues, local and international and money spent on projects in hand. It is felt that the rupee came down sharply in relation to dollar because of poor economic performance and political instability in the country.
INTERBANK MARKET RATES: As a result of higher demand for dollar, during year 2011-12, the rupee lost Rs 8.70 or 9.19 percent at 94.60 and 94.65.
OPEN MARKET RATES: The rupee tracked the same pattern, falling approximately 10 percent in terms of dollar for buying and selling at 95.80 and 96.00. The rupee shed Rs 4.60 or 3.84 percent versus euro at Rs 119.80 and Rs 120.80. It, fell by 10.85 or 7.31 percent against the pound sterling at Rs 148.50 and Rs 149.50, against Australian dollar the rupee shed Rs 4.57 or 4.72 percent at Rs 96.76 and Rs 97.26 and the rupee inched down by Rs 2.40 or 9.5 percent versus the Saudi riyal at Rs 25.25 and Rs 25.45 for buying and selling, respectively.
ECONOMIC PERFORMANCE: Under the hustle and bustle on the economic and political fronts, the rupee could not maintain its firmness versus dollar last year due to higher payments for oil amid shrinking financial assistance by some friendly countries.
Due to several factors, the rupee was not able to resist steep losses amid disruption of financial aid by the friendly countries. As a whole, the rupee fluctuated marginally versus dollar, but during the final quarter, the rupee lost 9 percent amid apprehensions over the delay in the decision regarding Nato supplies. As Pakistan stopped Nato supplies in November after the killing of 24 Pakistani soldiers by a US air-strike. It is expected that restoration of Nato supplies would help re-opening other sources for dollars' flows, like the foreign loan and grants, particularly from IMF.
The countries which were providing financial aid or assistance such as US and North Atlantic Treaty Organisation (Nato) were reluctant due to tricky developments. One of the leading factors behind the rupee's decline is dollar's appreciation in terms of the major currencies in the world market, due to depreciation of euro, under pressure due to crisis in Europe.
Rising trade gap of over 19 billion dollars during the 10 months, erosion of foreign exchange reserves, contributed in the fall of the rupee. The SBP Governor pointed out that like most other central banks the SBP only undertakes calibrated interventions to diffuse volatility. "We face no risk in being able to make next year's IMF payments from our adequate reserves," he had said.
To control inflation, the SBP kept the policy rate unchanged at 12 percent, which apparently looks a positive sign for the country's ailing economy, the central bank underlined the need for urgent fiscal measures to tackle the hurdles in reform programmes.
ENERGY SHORTAGE: To meet energy crisis, country imported oil, causing huge payments in dollars, high expenditures on non-development undertakings and many uneven developments on both economic and political fronts. It is high time Pak leadership concentrate on building dams meet power needs. Reports are coming around eight to 10 dams are being built.
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