Impact of Devaluation on Currencies on the Performance of Industries Report 2022

Running head: Impact of devaluation on currencies on the performance of industries
Impact of devaluation on currencies on the performance of industries
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Impact of devaluation on currencies on the performance of industries1
Executive summary
The Current account deficit was the highest in the FY 18 compared to FY 17. In the
FY 18, the CAD was around 6.3% whereas the CAD in FY 17 was around 4.3%. The
exchange rate within Pakistan was declining continuously and the cumulative exchange rate
decline was having growth of around 13.6% between July 2018 and March 2019. The value
of Rupee against dollar was around 3.2% and the amount is close to 146.52 a dollar against
rupee made the situation worse. In Pakistan, industries are heavily dependent on imported
raw materials for industrial goods and capital goods and components, and quotas and tariffs
block their access to advanced countries. A rise in the price of any component through
currency devaluation will increase the cost of imports. Pakistan is occupied by 70% of deserts
and this is acting as another factor behind the lack of growth within the economy.

Impact of devaluation on currencies on the performance of industries2
Table of Contents
Introduction................................................................................................................................3
Economic Condition of Pakistan................................................................................................3
Weaker currency....................................................................................................................3
Dollar reserve of Pakistan and Asian countries.....................................................................4
Wide Trade deficit of Pakistan...............................................................................................5
Critical evaluation of economic condition of Pakistan..............................................................6
Devaluation of currency.........................................................................................................7
Economic outlook of the country...........................................................................................7
Relationship with trade partners.............................................................................................8
Key industries within the Pakistan.............................................................................................9
Performances of industries within Pakistan...............................................................................9
Impact of devaluation of currencies on Industrial performances of Pakistan..........................10
Conclusion................................................................................................................................10
Reference and Bibliography.....................................................................................................12

Impact of devaluation on currencies on the performance of industries3
Introduction
Currently the impact of devaluation of currency is falling on the world economy. Due
to mismatch in the global terms of trade the currency price is not going to the desired
directions. In order to indulge the development of high grade of currency price, the economy
of Pakistan is already falling because of decreasing level of international trade and falling
GDP growth rate. Through this study, it will be easy for the economy of Pakistan to bring in
new changes within the policy by understanding the existing gaps in policy implication
depending on the crucial economic factors like inflation, rate of interest and taxation policies
for the export and import of the economy. Current situation of Pakistan is more prone
towards reduction of government expenditure, increase in tax that will create problems in the
end as the growth in domestic credit will fall, and the real interest rate will increase. More or
less the country is not aiming to increase the GDP. Through the development of better level
of employment opportunities for the country, Pakistan will improve its position in the global
market. Some of the industries like woollen textile industry, cement industry and sugar cane
industry had popped up previously (NAWAZ SHEIKH & Siddiqui, 2019). This report will
discuss the impact on the export and import off the country and the industries that are
involved in this. This will also discuss the influence of the devaluation in currency on the
exports and imports of the industries.
Economic Condition of Pakistan
Weaker currency
The devaluation of currency is nothing but the downward adjustment of the currency
of a country with respect to the other country’s currency. The devaluation is the tool of
monetary policies and this is used majorly to improve the trade balance of the country. In the
below diagram, devaluation of Pakistani currency is shown from Dec, 2017 to Nov, 2018.