Opinion: Financial murder of the country is in progress!
Thread
explaining the reasons.
First, basics are explained, followed by how this murder is happening, then outcomes, lastly possible solution.
Basics;
1. Pakistan is a weak economy but not so weak, we do have many established industries that somewhat fulfill local/export needs, including textile, chemical, steel, ,home electronics, food processing, pharmaceuticals, autos, motorcycles, leather, sports, surgery, etc.
P.S. Many local businesses & traders employ Pakistanis, which is why we are alive and people are not starving like in Africa
2. The Pakistani rupee had a weak value but it was still considered a valuable legal tender for trading, & it was based on USDs issued against its payment
The PKR value is determined by the supply & demand for USD/other currencies during the day, rather than by state bank reserves. On any day, if someone pays a specific PKR, he can get USDs. If there is a greater demand for USDs, the PKR loses value; otherwise, the PKR gains.
3. All industries/businesses work on short term financial bases, they move money, earn, pay salaries, & do more business
4. Imports are not always bad: Pakistan textile exports contain a number of items, chemicals, & cloth that are imported, but we add value and export,
many pharma companies import raw materials & manufacture in Pakistan; & imported parts of mobile phones are better than assembled phones (at least saving some value). Furthermore, Bangladesh is the best example—it imports all cotton and leads the world in textile exports.
How is this murder happening:
1. Normally, on any trading day, when outgoing USDs are more than incoming USDs, PKR loses value but all payments are processed. Banks don't interfere, they just offer the best possible rates according to the demand and supply of both parties.
The first step was stopping payments and ending the legal value of PKR for external payments. Now all industrialists, businesses even with Billion of PKR, cannot import.
2. This has rendered many industries inoperable, beginning with automobiles, tractors, and mobile phones, and progressing to home electronics, textiles, chemicals, and, most recently, pharmaceuticals and petroleum.
3. Everything is slowing down as a result of this: businesses are unable to pay salaries, and import needs are not being met through legal channels.
4. As a result, black market players emerged to meet local needs and begin offering better rates on remittances and some exporters, who are still working because they are not overly reliant on imported raw materials. Overall now, Pakistan is receiving fewer dollars.
5. Now that the industry is closed, money isn't coming in from overseas Pakistanis, the country is stuck, payments to airlines aren't even going through, shortage of goods/necessary items ,joblessness, and many small problems are emerging
What's next?
1. We are about to run out of fuel and basic medicines in a few weeks, and thousands of people will lose their jobs.
2. If a business closes today, it can not restart suddenly. They need long-term planning, financing, deals, and organization to operate . It loses everything in the closures we are experiencing. Pakistan's economy will be worse than that of African countries with no businesses.
3. Jobless people with very high inflation & depreciated currency. It will increase crime, hunger, & many other social problems.
Solution (difficult but possible):
1. It is all happening because the govt is forcing currency & not fulfilling its promise of giving it legal value.
Govt should now understand that PKR should trade freely, not on wish of 140Rs or 200Rs.
If the government shows courage now, personally see 270s, but things will settle down; otherwise, we will lose everything and the crash will be worse.
2. PKR should offer better rates from legal channels than illegal channels, it was happening under Reza Baqir, remittances and exports will start coming from legal channels, which alone can add at least $1BN/month to the economy (previous levels).
3. Expensive $$ can slow down imports, but important things will start coming, businesses will start working, & Pakistan will survive!
Lastly,
All prayers for the economy of Pakistan as we all are directly or indirectly linked with it.
*illegal channels are offering 255Rs vs 224Rs on legal channels.