Currency Devaluation

[shahid amin]

Salam to all members...
Please tell me reasons of currency devaluation in Pakistan now-a-days.

Waiting for your replies.

[Toronto_Boy]

Deficit financing for non-development expenditures, ever increasing import bill, increase in exports is less than required in real terms, appreciation of foreign currencies relative to Pak. Rs., depreciation of domestic currency, ever increasing current account deficit and trade imbalance, inflow of capital (and foreign exchange) is less than required, nature of spending habits of Pakistani public and their leaders (even foreign exchange expenditures of Pakistani public on tea, of which we do not produce a single leaf, is among the largest expenses in foreign exchange), continuously increasing oil and comodity international prices, huge foreign exchange outflow of blackmoney that brings much pressure on domestic currency, Khanani Kalia, Zarco Exchange scams etc. etc. etc.

[kohatian]

zardari=10% total daficit=43%
nawaz =2%
other lotere sugar mill=11%
total unknown wasteful expense=20%
total 43%
decide and not use so sweet word their is no govt.

[shahid amin]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kohatian</i>
<br />zardari=10% total daficit=43%
nawaz =2%
other lotere sugar mill=11%
total unknown wasteful expense=20%
total 43%
decide and not use so sweet word their is no govt.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
great yar

[mjawad]

At the most basic level, currency is devalued when more of it becomes available (i.e. it is printed out of thin air backed by nothing, like gold or an increase in agricultural or industrial production capacity).

Another reason a currency is devalued is because a country takes loans beyond its capacity to settle them and this is when state bank kicks in to devalue the currency by setting the exchange rate.

Either way devaluation of currency is a way of imposing taxes on her people as it results in loss of wealth / purchasing power of the people.

In my opinion it is the most effective way for the elite to enjoy the fruits of labor of the other lower class.

[mudassar2704]

Devaluation of currency has many impacts and trigers.
As at current Pakistan is going through the ever worst economic situation where we have huge deficit of balance of payments and balance of trade. Ofcourse eigther Govt can borrow from IMF, world bank etc to meet this deficit or it can go for other remedies. Currency devaluation is one of these remedies for controlling increasing deficit. Whem currency is devalued decrease in the local demand of imported goods occur hence resultant decrease in imports and ultimate improvement in trade deficit. Similarly local goods get more value internationaly in terms of Pak rupees so export activities are encouraged and again ultimate improvement in deficit of trade balance.

But this devaluation process is very critical to manage because in economy like Pakistan where we pay a major %age of GDP in paying off our foreign debts and interest on them, it can have bad results as well. We need more Pak rupees to settle our foreign liabilities. Also currency devaluation can bring a flood of infaltion which has happend in case of Pakistan.

[amir7500]

The main reason is burden of debt and deficit in the balance of payment.