Economic analysts say Pakistan’s chronic reliance on an artificially managed exchange rate has repeatedly undermined export competitiveness and contributed to recurring balance-of-payments crises, despite short-term gains in political optics and price stability.
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In a commentary published on Sunday, former corporate executive and economic observer Ehsan Malik argued that the exchange rate — a critical macroeconomic variable for a country dependent on foreign exchange — has long been treated as a stabilisation tool rather than as a signal for investment and long-term economic strategy.
Mr Malik noted that while a competitive exchange rate can improve export margins, boost investment in tradable sectors and enable domestic firms to compete in global markets, credibility is equally vital. Exporters require confidence that relative prices will remain aligned with fundamentals, which has repeatedly been absent in Pakistan’s policy environment, he said.
The article reviewed several historical cycles in which the rupee was held at overvalued levels for extended periods, only to undergo abrupt corrections once reserves depleted. This pattern, observed during the Musharraf era and again between 2013 and 2017, prompted late and disruptive devaluations that destabilised firms, inflated costs and weakened confidence instead of supporting a smooth adjustment.
Mr Malik also highlighted more recent distortions, including administrative controls, multiple exchange rate windows and delayed adjustments. In early 2023, the rupee recorded steep depreciations after prolonged interventions, with export gains largely offset by rising financing costs, higher energy prices and stabilisation measures such as import compression.
Citing regional examples, the author said successful export economies avoid dramatic currency swings and allow gradual market-aligned adjustments supported by predictable taxation, competitive energy pricing and efficient logistics.
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He concluded that Pakistan’s core issue is not choosing between a strong or weak rupee, but abandoning the belief that administrative controls can substitute for competitiveness and credible export strategy.