Pakistan's rupee is poised to become the global frontrunner in currency performance this month, and this upswing is attributed to a government crackdown on illegal dollar trading, according to Bloomberg News.
During September, the Pakistani rupee has witnessed a remarkable surge of nearly 6 percent. This remarkable rally stands in stark contrast to the depreciation experienced by many other currencies like the Thai baht and South Korean won, which weakened against the US dollar amid speculations of prolonged elevated US interest rates.
As of Thursday, the rupee recorded a 0.1 percent increase, trading at 287.95 per dollar after hitting a record low of approximately 307 earlier in the month.
Nonetheless, it's crucial to acknowledge that despite Pakistan's currency being the top performer for the month, the nation is confronting a severe financial crisis marked by surging inflation and substantial government debt levels.
A recent report from the World Bank indicated that poverty in Pakistan had escalated to 39.4 percent during the last fiscal year, with an additional 12.5 million individuals slipping into poverty due to unfavorable economic conditions. The report strongly urged Pakistan to take immediate measures to restore financial stability.
Tobias Haque, the World Bank's lead country economist for Pakistan, remarked, "Pakistan’s economic model is no longer reducing poverty, and the living standards have fallen behind peer countries."
It's noteworthy that a currency's impressive performance does not necessarily translate to overall economic well-being. A similar scenario was witnessed in Afghanistan, where Afghani emerged as the world's top-performing currency in the September quarter, appreciating by 9 percent during that period.
This surge was primarily attributed to an influx of humanitarian aid and increased trade activities with neighboring Asian nations. Nevertheless, Afghanistan is also grappling with severe economic challenges, with the United Nations estimating a substantial shortfall in the required assistance for the country.
The Taliban regime in Afghanistan has taken measures to control the currency, including banning the use of US dollars and Pakistani rupees in local transactions and imposing stringent restrictions on the outflow of US dollars from the country.
They have even criminalized online currency trading, with the threat of imprisonment for offenders. Despite these efforts, Afghanistan's economic situation remains precarious, with millions of people confronting severe food scarcity.
Therefore, while currency performance can offer insights, it is essential to consider the broader economic context and underlying challenges when evaluating a country's financial well-being.
