The rupee's ongoing depreciation is making imports costlier in local markets which will certainly push up inflation. It can also result in the dollarization of the economy. It is, however, interesting to note that dollarization of the economy is described as a state in which people want to turn their assets into dollars to stave off the effects of depreciation in local currency; but in Pakistan, the smuggling of dollar to Afghanistan has already created or exerted a lot of pressure on the PKR.

This is why perhaps one USD is now equal to Rs 174 or even more. Higher growth objective or goal demands increased imports. The evolving Afghan situation indicates stepped-up smuggling of USD to Afghanistan. Foreign minister Shah Mehmood Qureshi must have discussed the issue of USD smuggling to Afghanistan with the Taliban leadership in his recent visit. His Afghanistan tour must translate into a marked appreciation in PKR's value in coming days and weeks.

Taufiq Qaimkhani (Hyderabad)

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