Special Edition-07.pdf - Lahore School of Economics

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132 M. Ashraf Janjua Exchange Rate Date / Period Exchange Rate Regime (Pak Rupee per US App(+)/ Dollar) Dep(-) Prior to August,1955 3.31 8/1/1955 (i) Fixed Exchange Rate 4.76 -30.46 5/11/1972 from 14-8-1947 to 07-01-1982 11 -56.73 13-Feb-73 9.9 11.11 8-Jan-82 10.1 -1.98 1981-82 10.5535 -4.30 1982-83 12.7063 -16.94 1983-84 13.4838 -5.77 1984-85 15.1668 -11.10 1985-86 16.1391 -6.02 1986-87 17.1795 -6.06 1987-88 17.5994 -2.39 1988-89 19.2154 -8.41 1989-90 (ii) Managed Float 21.4453 -10.40 1990-91 from 8th Jan. 1982 to 21st July 1998 22.4228 -4.36 1991-92 24.8441 -9.75 1992-93 25.9598 -4.30 1993-94 30.1638 -13.94 1994-95 30.8507 -2.23 1995-96 33.5684 -8.10 1996-97 38.9936 -13.91 1997-98 43.1958 -9.73 1998-99 - (iii) Two tier Exchange Rate System 50.0546 46.7904 -13.70 (Multiple Exchang Rate) from 22nd July 1998 to 18th May 1999 1999-00 - (iv) Dirty Float: SBP defending the 51.7709 -3.32 exchange rate within a narrow band from 19th May 99 to 20th Jul 2000 2000-01 (v)from Managed Float to Floating 58.4378 -11.41 2001-02 Exchange Rate regime 61.42580 -4.86 2002-03 Since July 20, 2000 58.49950 5.00 2003-04 57.57450 1.61 2004-05 59.35760 -3.00 2005-06 59.85660 -0.83
Pakistan’s External Trade: Does Exchange Rate Misalignment Matter for Pakistan? 133 1) The two-tier exchange rate system was introduced on July 22, 1998. The new mechanism was based on: a) official exchange rate, b) floating inter-bank exchange rate, and c) composite rate. 2) The exchange rate system was unified on May 19, 1999. Since the free float of the rupee, the monetary policy has played a dominant role in stabilizing the exchange rate in Pakistan. Significant ups and downs in forex rates are now being monitored through effective instruments of monetary policy. Similarly, whenever speculative activities are observed in the market, they are tackled with proactive monetary policy measures taken by the State Bank. The Bank uses the instrument of discount rate to control undue pressure on the exchange rate while the CRR or mopping up of excessive liquidity through purchases from the kerb market are used to curb speculative activities in the forex market. According to the SBP, the following considerations are generally taken into account while looking at the level of the exchange rate from the monetary policy side: 1. The existing level of the exchange rate has helped improve the build-up of forex reserves. There is a continuous increase in forex reserves, which is also a positive sign for the economic stability of the country. 2. The existing exchange rate level has sufficiently discouraged speculative activities in the forex market. 3. The rate has also helped discourage inflows of foreign remittances from illegitimate channels. Now there are less incentives for remitters to transmit their money through Hundi or other illegal channels. 4. The rate has helped strengthen the role of the inter-bank market. The two forex markets are expected to integrate if the existing rate prevails for a longer period. 5. The existing level of the exchange rate has smaller pass-through, which is evident from the lower inflation rate. 6. The rate is also providing an incentive to capital inflows. Some positive developments are also witnessed on the private foreign investment front.
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Special Edition ISSN 1811-5438 THE
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THE LAHORE JOURNAL OF ECONOMICS Con
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Monetary, Fiscal and Financial Sect
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The Lahore Journal of Economics Spe
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Reforming the Government in Pakista
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18 A. R. Kemal export product would
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22 A. R. Kemal Rank Score Efficienc
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26 A. R. Kemal across the globe whi
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Increasing Global Competitiveness:
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Monetary and Fiscal Policies 45 sys
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Monetary and Fiscal Policies 47 200
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Monetary and Fiscal Policies 49 (es
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Monetary and Fiscal Policies 51 The
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Monetary and Fiscal Policies 53 The
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Monetary and Fiscal Policies 55 Thi
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Monetary and Fiscal Policies 57 Whi
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Monetary and Fiscal Policies 59 exc
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Monetary and Fiscal Policies 61 mat
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Monetary and Fiscal Policies 63 Tax
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Monetary and Fiscal Policies 65 Ref
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68 Shakil Faruqi Currently, the fin
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11. All references used in the text
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The Lahore School of Economics The
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