As the Rupee Plunges

There is a saying in Punjabi:

zaat di kohôr-kirley tay sheteer-a naal japhay. (A lizard by cast
embraces the roof beams). A lizard is considered a lowly creature
and when it sits (upside-down) on the ceiling it appears to be
attempting an embrace with the mighty wooden beam that supports
the weight of the roof, it is considered a travisty. This punjabi
``misaal`` fits well to the notion of the poor rupee attempting a
lock-step ``linkage`` with the Almighty Dollar.

Why that would be splendid if it could be done. But then, if
wishes were horses, beggars would ride.

The Government of Pakistan did not ``devalue`` the ruppee. It
acknowledged the market reality and called a spade a spade.
The official State Bank rate has been brought somewhat closer
in line with the true market value of the rupee. Reality,
an uncanny habbit of raising its ugly head even in the
surreality of Pakistani economics, if not in politics.

The frightening reality is that Pakistan is in ``technical
banckruptcy``. The total Dollar deposits in private accounts
of all banks in Pakistan is over $10 Billion. However, the
AVAILABLE dollar reserves in Pakistan are less than $1.5
Billion. In other words if every dollar account holder in
Pakistan goes to his bank and wishes to withdraw only $16.00 out
of every hundred dollars he has in his (or her) account,
Pakistan will become instantly insolvent and the whole
financial system would collapse. This is so, because over
the years the State has been robbing the dollar accounts
of commercial banks and squandering the foreign exchange.
Now there are LESS than $16.00 left for every $100.00 that
were originally deposited. The remaining $84.00 are simply
not there. The State Bank has issued IOUs in lieu of those
missing $84.00 dollars which the commercial banks hold.

This is a dreadful situation. Imagine what could happen as a
direct consequence? The rupee could plummet as low as
Rs 350.00 - US$ 1.00, or worse. And that would be just the
tip of the iceberg.