Credibility gap

There are a number of negative factors that worry people. The foreign exchange reserves have gone down to an extent that the country can only finance two months of imports. The negative balance of payments and the liquidity crunch have created doubts about its ability to honour the upcoming $500 million Euro bond debt obligation. Standard and Poor's has revised down Pakistan's credit rating from B to CC+. The steep decline of the rupee, reaching a peak level of Rs 81.10 against the dollar, has deeply perturbed the common man and the business community. One hopes the intervention by the State Bank in the interbank market with $200 million and an offer to exchange companies of an unlimited supply of the greenback at a nominal rate of Rs 80 would help stem the decline. Once this has happened, there would be a need to ensure a stable rupee. If things are managed with care, inflows from the US, China, UAE and other friendly countries might help. Still the Advisor Finance has a long way to go. Mr Shaukat Tarin has accused a cartel of bankers of manipulating the rupee depreciation. It remains to be seen what action the State Bank takes against this bunch of greedy individuals who have played with the livelihood of millions of people and put the economic system in jeopardy.

One of the reasons why groups of unscrupulous but powerful fly-by-night investors, hoarders and market manipulators of all types, have had a field day under the Musharraf regime was an absence of political will. The unelected government was wary of touching the powerful lobbies. Unless the present government proves that it is able to act strongly to stop those indulging in unethical market manipulations, it would not be able to restore public trust in the system. Many would watch how the government reacts to the Competition Commission of Pakistan's request to the ECC for political backing to deal with the alleged cartelisation of cement and sugar sectors. To make the system succeed it is necessary to revive public confidence in it.