DECLINE OF THE PAKISTANI RUPEE

Abstract

The rupee was devalued by 12% during the fiscal year 1995-96. This devaluation was generally supported by the textile industry, but there were many people who argued against it. To understand the impact of devaluation on the Pakistani economy, the Lahore Chamber of Commerce and Industry held a debate between Professor Sajjad Haider, senior economist at the Chamber, and Professor Ijaz Nabi of LUMS. Professor Haider supported the devaluation decision while Professor Nabi presented a more cautionary scenario. This case is a summary of this debate. The key issue discussed was the interlinkage between budgetary deficit, trade balance, inflation, export competitiveness and foreign currency reserves.