It is common knowledge that every nation is facing tough international competition in the field of economics. Pakistan faces a higher challenge for the reason that Pakistan’s economy has become a high-cost economy over the years. One of the reasons for the high cost and burden of debt was the artificial overvaluation of rupee in the last decade. Resultantly the rupee had to be evaluated to give a boost to exports.
The drastic devaluation of rupee in the recent past has increased debt by three trillion rupees and the increase in discount rate has caused an impact of over a hundred billion rupees. Due to high discount rates and increases in gas prices, the cost of doing business has risen to the extent that many small and medium business enterprises have had to declare bankruptcy. The major beneficiaries of high-interest rates are the commercial banks. It is evident that any further devaluation would be catastrophic for the economy. The discount rate should also be rationalized in view of its negative impact on the economy.
Dr Najeeb A Khan
Boston
USA
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