EXCHANGE RATES & ITS

IMPACT ON PAKISTAN’S
ECONOMY
PRESENTED BY: AHSAN PASHA, HAMZA RIAZ, ESSA BASHIR,
HAMMAD ABDUL QAYYUM, HARIS BIN ZAHID, KHAWAJA AHMAD
KASHIF, SYED ZEESHAN HAIDER AND MUHAMMAD SHAHZAIN
 WHAT IS AN EXCHANGE RATE

• RATE AT WHICH CURRENCIES COULD BE EXCHANGED FOR SOME OTHER

• VALUE OF 1 KINGDOM’S FOREIGN MONEY VS THE COST OF SOME OTHER
KINGDOM FOREIGN MONEY
 HISTORY
• IN THE 1960S AND 1980S, THE PAKISTANI ECONOMY WITNESSED
EXTRAORDINARILY HIGH RATES OF GROWTH.
• 1960 AND 1990, PAKISTAN’S GDP GROWTH WAS HIGHER THAN THAT OF
SOUTH ASIA FOR ALL BUT JUST FIVE YEARS
• THE COUNTRY'S COLLAPSE IN 1971 WAS A DEVASTATING EVENT FOR
THE COUNTRY'S ECONOMY AND POLITICS.
• SINCE 1988 PAKISTANI ELITE AND STATE STRUGGLED TO CREATE A
UNIFIED AND STABLE ECONOMIC FRAMEWORK.
• DOMESTIC POLITICAL TENSIONS AND POLICY SLIPPAGES ALSO LED TO
PROTRACTED MACROECONOMIC IMBALANCES
 RESEARCH QUESTIONS

• WHAT’S THE EFFECT OF ACTUAL EXCHANGE RATE ON TRADE BALANCE?

• HOW DOES THE DEPRECIATION AND DEVALUATION EFFECTS THE COUNTRY’S
ECONOMY?
 EXCHANGE RATE POLICIES

• FLEXIBLE/FLOATING EXCHANGE RATE

• FIXED EXCHANGE RATE
• DUAL EXCHANGE RATE
 FIXED EXCHANGE RATE

• VALUE OF TRADE FEE IS CONSTANT TO SOME OTHER CURRENCY

• GOVT. INTERVENTION IS OBLIGATORY TO KEEP THE CONSTANT TRADE FEE
 FLEXIBLE/FLOATING EXCHANGE RATE

• IS A ECONOMIC SYSTEM.
• EXCHANGE PRICE IS DECIDED WITH THE AID OF USING DELIVER AND
DEMAND
 DUAL EXCHANGE RATE

• USE OF BOTH FIXED AND FLOATING EXCHANGE RATES

• GOVT. APPLIES FIXED OFFICIAL EXCHANGE RATE
• FLOATING EXCHANGE RATE IS APPLIED TO SPECIFIC GOODS OR TRADING
CONDITIONS
CURRENCY DEVALUATION AND DEPRECIATION
Pakistani Rupee
against USD
1993-2012
CURRENCY DEVALUATION AND DEPRECIATION
Pakistani Rupee
against USD
2017-2020
PAKISTAN’S EXPORTS
Pakistan’s Export
2007-2012
 PAKISTAN’S EXPORTS

Pakistan’s Exports
2016-2020
• PAKISTAN EXPORTS FOR 2020 WAS
$25.26B, A 10.29% DECLINE FROM 2019.
• PAKISTAN EXPORTS FOR 2019 WAS
$28.15B, A 0.25% DECLINE FROM 2018.
• PAKISTAN EXPORTS FOR 2018 WAS
$28.22B, A 12.22% INCREASE FROM 2017.
• PAKISTAN EXPORTS FOR 2017 WAS
$25.15B, A 1.32% DECLINE FROM 2016
 FACTORS THAT INFLUENCE EXCHANGE RATES

• INTEREST RATES
• INFLATION
• POLITICAL STATUS
• DEBT
• TRADE
• RECESSIONS
 IMPACT OF CURRENCY DEVALUATION &
DEPRECIATION ON PAKISTAN’S ECONOMY
• POSITIVE IMPACTS
1. EXPORTS ARE CHEAPER
2. ECONOMIC GROWTH
3. IMPROVES TRADE
• NEGATIVE IMPACTS
1. INCREASES LOAN REPAYMENTS
2. REDUCES OVERSEAS PURCHASING POWERS
3. RAISE COST OF CAPITAL EQUIPMENT IF IMPORTED
 ISSUE’S PAKISTAN FACES
• DUE TO COUNTRY’S CURRENCY DEVALUATION & DEPRECIATION, PAKISTAN
FACES
1. INCREASE LOAN REPAYMENTS
2. HIGHER INFLATION
3. EXPENSIVE IMPORTS
4. INCREASE IN POVERTY (ROBUST DEVALUATIONS USUALLY BOOM THE CHARGE
OF DOMESTIC GADGETS AND THE FEES OF CLOSE BY PRODUCTION BECAUSE
OF THE TRUTH INFLATION GOES UP)
5. DECREASE IN PRODUCTIVITY BECAUSE OF THE DECLINE IN INCENTIVES OF
CORPORATIONS TO REDUCE COSTS.
 SOME FACTS

• THE INFLATION RATE IN 2016 WAS 1.26%. THE CURRENT INFLATION RATE
COMPARED TO LAST YEAR IS NOW 10.74%.
• PKR123 AGAINST THE USD IN AUGUST 2018 TO PKR177 AGAINST THE USD IN
DECEMBER 2021, A DECLINE OF 30.5% OVER THE LAST 40 MONTHS.
• THE WORLD BANK (WB) HAS ESTIMATED THAT POVERTY IN PAKISTAN HAS
INCREASED FROM 4.4 PER CENT TO 5.4 PER CENT IN 2020, AS OVER TWO
MILLION PEOPLE HAVE FALLEN BELOW THE POVERTY LINE.
• PAKISTAN GDP GROWTH RATE FOR 2020 WAS 0.53% (-4.85% ANNUAL CHANGE
FROM 2016
SUMMARY
 DATA SOURCE

• HTTPS://WWW.BUSINESS-STANDARD.COM/ARTICLE/INTERNATIONAL/POVERTY-IN-
PAKISTAN-RISES-TO-OVER-5-IN-2020-ESTIMATES-WORLD-BANK-
121062200084_1.HTML#:~:TEXT=THE%20WORLD%20BANK%20HAS
%20ESTIMATED,FALLEN%20BELOW%20THE%20POVERTY%20LINE
• HTTPS://WWW.MACROTRENDS.NET/COUNTRIES/PAK/PAKISTAN/GDP-GROWTH-RATE
• HTTPS://CORPORATEFINANCEINSTITUTE.COM/RESOURCES/KNOWLEDGE/ECONOMICS/
FLOATING-EXCHANGE-RATE/
• HTTPS://WWW.MACROTRENDS.NET/COUNTRIES/PAK/PAKISTAN/EXPORTS
• HTTPS://PIDE.ORG.PK/BLOG/EXCHANGE-RATE-OVERSHOOT-READJUST-AND-
OVERVALUED/