The Pakistani rupee might be devalued again to increase exports and decrease imports.
The government of Pakistan is eyeing devaluing the Pakistani currency against the dollar to accommodate exporters and discourage importers. There is no doubt that late 2023 to mid-2025 will be the most stable year for the Pakistani rupee against the USD. However, Pakistani exports are just a marginal increase compared to FY 2024. It is reported by the media that the State Bank of Pakistan might go for devaluation to increase exports and decrease imports, which is the most commonly used formula to increase exports. By devaluing the currency, Pakistani exports become competitive globally, and our exporters and industries can compete against any country. Pakistan requires devaluation because India, Sri Lanka, and Bangladesh are constantly devaluing their currency to accommodate their exporters and discourage imports. Devaluing the currency is the most used formula to increase exports and decrease imports. However, from 2013 to 2017, the government at the time believed that adjusting the currency or devaluing PKR against USD was not the right decision. Therefore, due to that decision, Pakistan could not increase exports, and Pakistan posted a current account deficit of USD 19 billion.
Devaluing currency requires the right method, as it is a double-edged sword because it also brings inflation. That is why many governments avoid devaluing the currency. At this moment, the Pakistani rupee REER is below 100, which is good; however, Pakistan needs to follow Indonesia's path, where they used to devalue currency 25% on an annual basis. Indonesia also ensured that, while devaluing the currency, their industries are efficient as well, and it does not impact the ordinary people in their country. Therefore, the government's approach is right, but they have to ensure that ordinary people in Pakistan do not get affected by this decision, as it is a fact that even locally produced product prices have also increased due to devaluation.
