Pakistan plunges deeper into economic pit

By Mehtab Haider

ISLAMABAD: The free fall of key economic indicators continues unabated as Pak Rupee depreciated by Rs12.4 against US dollar and crossed Rs75, foreign reserves depleted by $3.64 billion and stock market tumbled by 5224 basis points during the tenure of the five month old elected government.

On August 13, 2008, Pakistan’s foreign currency reserves fell below $10 billion and touched $9.66 billion against $13.30 billion on March 31, 2008, registering a fall of $3.64 billion or 27.4 per cent in reserves in the last four and half months period of Gilani’s government.

In the period under review, overall inflation went up to 24.3 per cent, food inflation 33.8 per cent and non food inflation to 17.3 per cent till August 13, 2008.

“No power on earth can stop from approaching the IMF probably by September or October 2008,” a high-level official confirmed while talking to The News here on Wednesday and added that it was just matter of Finance Ministry’s decision when it decided to write an official letter to the IMF for seeking a ‘tough bailout package’.

Inflows of dollars, the official said, are desperately required to stop the free fall of rupee against the dollar. Panic in the market has also resulted into growing tendencies for currencies current swap as capital flight increases manifold, he added.

The sources said that they could visualize a tough economic situation for the masses under the IMF bailout package, when there would be no option to jack up POL as well as electricity prices in one go.

“We have conveyed this whole situation to Finance Minister, Syed Naveed Qamar but he also seems helpless before his party’s leadership,” sources commented and added that there was no focus on the economy, resulting in it inching towards the verge of collapse by every passing day.

According to official data, Pakistan’s foreign reserves stood at $15.8 billion on November 2007, which declined to $13.30 billion on March 31, 2008. On August 13, 2008, the hard earned foreign reserves dipped to $9.66 billion.

The exchange rate was Rs61.1 against the dollar on November 2007, which went up to Rs62.7 on March 31, 2008. On August 13, 2008, Pak Rupee touched its lowest and stood at Rs75.15 in inter bank rates against dollar and depreciated by Rs12.4 or 16.4 per cent in last five months.

Inflation of all types including overall CPI based inflation, food inflation, as well as non food inflation went up in the last five months. Overall inflation was 8.70 per cent by November 2007, which went up to 14.10 per cent on March 31, 2008. The inflation touched new heights and touched 24.3 per cent, food inflation jumped up from 20.60 per cent to 33.8 per cent and non food inflation from 9.40 per cent to 17.3 per cent for July 2008.

The Karachi Stock Exchange 100-Index stood at 15,126 basis points on March 31, 2008 which melted down to 9,902 basis points on August 13, 2008, registering a downfall of 5,224 basis points, which is equivalent to 34.5 per cent.

Stock market capitalisation was Rs4623 billion on March 31, 2008 when the Gilani government took over the reigns of power, which ended with a nosedive at Rs3100 billion on August 13, 2008, registering a fall of 32.9 per cent in five months.

The market capitalisation in terms of dollars stood at $73.70 billion on March 31, 2008, which went down to $41.28 billion on August 13, 2008, registering a fall of $32.4 billion or 44 per cent.

The News, 14/8/2008

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