Karachi: Ishaq Dar will return and will do everything in his power to manipulate the Pakistani currency further, said Pakistani economist Uzair Younus.
Commenting on what he said Pakistan’s obsession of a strong rupee against dollar, he said, “the relief provided in the wake of catastrophic floods will now be used to stimulate growth for the few, with the costs to be paid by the many.”
In a long Twitter thread, Younus said, “the rich need cheap dollars.”
Below is his complete analysis:
“The elite obsession of a strong PKR makes sense if you understand elites.
They extract wealth from their homeland and siphon it abroad.
When this is the goal, a weak currency means extracted PKR can’t fetch foreign assets cheaply.
That’s why they all love a strong PKR.
And ofc a strong PKR also provides cheap imports, meaning that things like an Audi Etron or a nice Rolex watch are relatively cheaper.
So a strong PKR means that ordinary citizens not only subsidize imported consumption of elites, but also their foreign asset purchases.
For ordinary citizens, a strong PKR brings some relief because the economic structure has been built to feed them cheaper imported goods, like palm oil and lentils.
But that dependency is a function and outcome of the extractive model elites have created to enrich themselves.
Which means that every single time the overvalued PKR can’t be sustained, it is ordinary citizens who are left holding the bag.
Their purchasing power is eroded over time, and that’s the price they pay for subsidizing the extractive behavior of elites.
Another driver of PKR weakness is a large fiscal deficit.
Why does have large fiscal deficits?
Because elites again do not want to pay a fair share in taxes.
From real estate to agri, they remain outside of tax net.
And no one wants to fix that equation either.
All they want is a currency that is manipulated for some period of time, during which the imports can be subsidized, wealth can be siphoned abroad, and large fiscal deficits run to create the illusion of growth and stability.
The only losers here are ordinary Pakistanis.
The economic system is rigged against ordinary citizens to such an extent that the SBP is running -ive real rates.
Anyone with some understanding of Econ will tell you -ive real rates & rapid growth in M2 is inflationary.
But fixing it means the party for the rich will stop.
In a country where financial inclusion is a pipedream, the CB is subsidizing access to money for those who already have a ton of it.
All this while the currency is spiralling down, M2 is going up, and the global bond market is signaling its contempt for you.
To me, at least, the entire exercise of rigorously analyzing this economy, its issues, and pathways to truly unleashing opportunity for the many, seems futile now.
If the country’s most influential people want to keep repeating old experiments, what use is our analysis?”
Follow Uzair Younus on Twitter @UzairYounus