LAHORE: The myth that rupee depreciation boosts exports is not true as exports remained stagnant from 1994 to 1999 despite massive rupee depreciation, but rose appreciably when the rupee was stable from 2003 to 2008, analysis of trade data reveals.
The foreign trade data of past two decades collected by The News showed that devaluation of rupee almost always failed to boost exports that grew during the period when the rupee remained stable against the dollar.
The data relating to rupee value was acquired from the State Bank of Pakistan and export statistics were taken from the Trade Development Authority of Pakistan. In the year 1994/95 the yearly inflation was 11.5 per cent and the exports were $8.13 billion. The dollar was at Rs31.51 in July 1995.
The exports fluctuated between $7.79 and $9.20 from 1999 to 2002. The dollar during this period increased from Rs35.05 in June 1996 to Rs60.12 in June 2002. During these seven years the dollar appreciated by almost 100 per cent against the rupee while the cumulative increase in the total exports was only 13 per cent or an increase of $1.1 billion in seven years of widely depreciating Pakistani rupee.
The exports from Pakistan increased by $2 billion in 2002/03 when the rupee started appreciating after June 2002 and touched Rs57.74 against the dollar. This increase was double in amount to the cumulative increase in exports registered in the preceding seven years.
Pakistan’s export increased further in 2003/04 to $12.31 billion when rupee showed stability around Rs57.9. The rupee depreciated to Rs59.66 against the dollar, but it was within the range of plus-minus five. Exports from Pakistan in 2004/05 were $14.39 billion, an increase of over $2 billion over the corresponding period of previous year.
The rupee was again almost stable at Rs60.16 against the dollar in 2005/06 when exports grew by over $2bn to $16.45bn.The dollar value slightly increased to Rs60.62 in June 2007 while the exports increased to Rs16.97bn dollars in 2006/07 an increase of only $500 million.
The rupee again showed stability in the first six months of next year and was valued at Rs61.17 in December 2007 but in the next six months depreciated to Rs67.25 in June 2008.
The export tempo maintained on historic stability of rupee pushed the exports to $19.05 billion in 2007/08. The exports started declining in the last six months of that year when rupee showed signs of weakness.
In the year 2008/09 the export took a dip of $1.5bn to $17.68bn as the rupee continued to depreciate against all major currencies of the world including dollar. In June 2009 it was valued at Rs80.95 against the dollar. This fiscal achievement of $20bn export target looks an uphill task as the rupee continues its declining trend. Currently it is being traded at Rs84.03 against the dollar.
Source The News
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