SBP intervenes

THE State Bank of Pakistan has intervened to save the rupee, which on Tuesday continued an inglorious slide against the dollar, and thus against all other currencies, from around Rs 60 to the dollar to Rs 74.60, thus ending one of the main achievements of the Musharraf government, and rekindling memories of the falling rupee during the last PPP government. The rupee was under pressure, according to the stock market gurus, because of negative economic developments and political uncertainty. The negative economic developments are two: first, the international oil prices are still rising, and a sustainable level, if there ever was one, has been passed a long, long time ago; second, food has become more expensive, with Pakistan forced to import wheat. Both oil and food can be imported for money, and Pakistan had no extra source of foreign exchange to meet these new demands. As a result, the rupee came under pressure. The State Bank can only make the descent of the rupee as smooth and painless as possible, but it cannot really avert it.