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The exchange rate is a critical economic variable for Pakistan. A competitive and credible currency regime should form the core of the nation’s economic strategy, particularly given the country’s dependence on foreign exchange for growth.
Unfortunately, Pakistan has repeatedly used the exchange rate as a short-term stabilisation tool, often holding it at levels that favour political convenience rather than economic fundamentals. Once reserves are depleted, this approach has led to abrupt and disruptive corrections consistently undermining rather than enhancing export potential.
That said, it is incredibly important to have a competitive exchange rate as it improves export margins, encourages investment in tradable goods, and signals the viability of producing for global markets.
History shows that prolonged artificial stability acts as a tax on exports and a subsidy to imports
