Blog

IN recent years, Pakistan’s foreign exchange market has presented a strange paradox: the rupee appears ‘stable’, official reserves have grown, and the informal/black market has receded.

But behind this illusion of calm lies a hollow economy, ie, exports remain stagnant, competitiveness is deteriorating, and industrial confidence is eroding. Is this the success of prudent macroeconomic stewardship or the triumph of administrative sleight of hand?

Despite the painful experience of at least six major currency crises, the state continues to obsessively fix the nominal rate. From 2023 to 2025, the authorities indeed managed to stabilise the currency and rebuild reserves. But at what cost?

The apparent stability has been engineered not through market trust or export dynamism, but through an elaborate system of administrative controls and currency rationing.

Today, Pakistan operates two distinct foreign exchange markets — one official, the other informal. This duality is a product of a long-standing desire to control the rupee.

The interbank market is tightly supervised by the State Bank of Pakistan (SBP), which apparently takes an upfront share of all foreign currency inflows from exports and remittances, and dictates to banks how much they may allocate towards import payments.

Letters of credit (LCs), particularly for so-called non-essential goods, are heavily restricted. The result is a deliberate throttling of demand, carefully orchestrated to sustain an artificial exchange rate.

The illusion is sustained by rising remittances, which have surged over the past two years. This rise is less a triumph of policy and more a symptom of a broken domestic economy.

A growing exodus of skilled and unskilled Pakistanis, unable to find opportunities at home, are sending more money back because inflation has increased the financial burden for families at home.

And in many cases, families that had once migrated have returned to Pakistan due to rising global living costs, prompting the bread earner to support them locally. These remittances have become the lifeline of our foreign exchange position, but are rooted in economic despair, not development.

Despite at least six major currency crises, the state continues to obsessively fix the nominal rate.

On the demand side, dollar outflows have contracted. The relocation of kosher capital (to escape an encumbering tax environment and the excessive and unpredictable cost of doing business) and capital flight driven by tax evasion, corruption and drug proceeds, has slowed due to tighter scrutiny in offshore jurisdictions.

Under-invoiced imports and smuggling, previously encouraged by high duties and GST, have receded in the face of weak consumer demand and a stagnating economy.

Foreign travel for education, pilgrimage and leisure has dipped due to the rupee’s depreciation and inflationary pressures, leading to an uptick in domestic tourism and greater reliance on private local universities. These declines, however, reflect contraction, not correction.

Increases in duties have often been employed as stopgap measures to suppress import demand and relieve pressure on the exchange rate. By raising tariffs, in particular on consumer and ‘non-essential’ goods, the government aims to reduce the outflow of foreign exchange, artificially easing the trade deficit.

This tactic, however, functions more as a tool of exchange rate defence than sound trade policy. While it may temporarily slow imports and delay the rupee’s depreciation, it raises input costs for domestic producers, discourages export competitiveness, and entrenches inefficiencies, ultimately undermining the very stability it seeks to preserve.

Meanwhile, enforcement has been used to fill the vacuum left by policy. The SBP has imposed hard caps on currency dealers, while the FIA conducts raids on the informal market — a theatre of suppression that conveniently lines the pockets of some enforcement personnel. It is a fragile peace, maintained through force and friction, not reform.

To justify the controls, the SBP continues to tout its Real Effective Exchange Rate as evidence of an undervalued rupee. Analysts quote it with reverence, but it is a meaningless number.

When trade is restricted, imports are rationed, and price signals are distorted, REER becomes little more than a statistical hallucination. Open up the market and the real rate will quickly emerge.

What we have, then, is not stability but suspension. The rupee’s apparent strength is not grounded in productivity, efficiency or a booming export sector. It is built on repression, rationing through administrative controls and borrowed credibility.

Exporters face rising input costs, shipment delays and disruptions in raw material supply chains, while international buyers grow wary of Pakistan’s reliability as a trading partner. The country is not becoming more competitive; it is simply freezing in place.

The question before us is not whether the rupee can hold its position. It is whether holding it in this manner serves the economic good. The longer we pretend that this engineered calm is sustainable, the more we strangle our industry, discourage investment and defer the inevitable reckoning. This is not macroeconomic management; it is macroeconomic theatre.

If Pakistan genuinely wants lasting stability, it must abandon its fixation with optics and return to the fundamentals. The foreign exchange market must be liberalised. Import restrictions through LC associated rationing must be replaced with prudent current account oversight.

Exporters must be supported with the real enablers of competitiveness, ie, energy, inputs, a rationalised import tariff configuration, logistics and regulatory certainty. Above all, the SBP must operate with transparency, not through coercion.

Ultimately, a lasting way to stabilise the exchange rate in Pakistan lies in credible fiscal correction. By curbing unnecessary spending, and improving a transparent and equitable tax structure with fair and consistent processes, the government can lower its reliance on external borrowing and money printing — two key drivers of currency pressure.

A sound fiscal position builds investor confidence, eases inflationary expectations and reduces the demand for foreign exchange, creating a more durable foundation for exchange rate stability than administrative controls or temporary inflows.

Until then, the rupee is simply a house of sand held together by borrowed time, borrowed dollars, and borrowed ideas. And sand, as we know, always slips through the cracks.

Nadeem Ul Haque is former deputy chairman, Planning Commission. Shahid Kardar is former governor, State Bank of Pakistan.

X: @nadeemhaque

Published in Dawn, July 4th, 2025

KARACHI: Sindh Senior Minister Sharjeel Inam Memon has announced that the provincial government has taken foolproof security arrangements for peaceful observance of 8th, 9th and 10th Muharram across the province.

Speaking at a press conference here, he said that a total of 49,662 police personnel will be deployed across Karachi, Hyderabad, Sukkur, Larkana, Mirpurkhas, and Shaheed Benazirabad from 8th Muharram till Ashura to prevent any untoward incidents.

He said that 14,546 police personnel would be deployed for security of majalis, while 35,116 to protect Muharram processions. He said that over 14,000 additional personnel had been assigned to ensure security of all events.

He said that recently Sindh Chief Minister Murad Ali Shah held meetings with scholars belonging to different schools of thought and reviewed the security plan for majalis and processions during the mourning period.

Defends curbs on rickshaws

Mr Memon, who holds the portfolios of information, transport and mass transit said that the Karachi commissioner had issued a notification on April 15, imposing a ban on the movement of rickshaws on 11 major roads in the metropolis.

He clarified that the ban did not apply to all of Karachi but was limited to specific main roads.

This measure has been implemented under the Sindh Motor Vehicle Ordinance, 1965 and it is the administrative authority of the government to regulate traffic and ensure convenience for citizens, he added.

Sharjeel says 50,000 police being deployed in Sindh from today

He questioned as to whether rickshaws operate on major roads in any other part of the country.

Speaking about the education sector, Mr Memon said that the Sindh government had recruited 93,118 teachers across the province, including 31,075 women.

He said that 2,100 teachers were appointed under the minority quota, while 1,330 positions were given to differently abled persons.

He said that the recruitment process carried out through the Sukkur IBA test with complete transparency, leaving no room for criticism.

As a result of these measures, 5,000 previously closed schools had been reopened.

Currently, 5.5 million children are enrolled in government schools across Sindh, four million in private schools, and one million in Sindh Education Foundation schools, he said.

The minister stated that the Sindh government had taken revolutionary steps in health, energy, infrastructure and climate change.

Published in Dawn, July 4th, 2025

WE just saw the release of the Pakistan Economic Survey 2024-25 and the presentation of the budget for 2025-26. There is a lot that can be said about the economy and the budget, but in this article I want to focus on education and what the Survey and the budget tell us about it and this government’s priorities. All figures in this article are taken from the Economic Survey 2024-25.

Empty vessels make the most noise, and the Economic Survey section on education is a poorly written chapter, which is clearly meant to hide more than to reveal, as well as to glorify while having nothing to extol. It tells us that enrolments at the pre-primary level have declined over the last year or so while those at the primary, middle and high school level have increased a bit and that college/ university enrolments have come down somewhat.

Do these statistics tell a story? Yes, they do, and a very strong one. They tell us that despite the prime minister’s declaration of an ‘education emergency’ and despite the fact that around 26 million five- to 16-year-olds are out of school, the government has neither a strategy for this category of children nor an actual plan that it is implementing. We are seeing trend movements in enrolments. If education was a priority, if there was a strategy, if a plan was being implemented, one would expect to see a strong movement — beyond the trend — in an upward direction. Instead, what we see is the usual drift. This is the story of education for the current government. In this regard, the story is no different from that for most governments of the past: education has not been a priority for any government.

The Economic Survey tells us that the national literacy rate stands at 60.5 per cent only: 68pc for men and 52.8pc for women. The urban literacy rate is 74.09pc — for urban men it is 78.13pc. For rural women, it is only to 41.67pc. So, the gender and rural-urban gaps continue to persist. But there is a story hidden in geography as well. Where the literacy rate for Punjab is quoted at 66.25pc, it is 42pc for Balochistan whereas for rural women in Balochistan, it is only 26.59pc, ie, only one in four women in rural Balochistan is literate.

It is clear that governments — federal and provincial — do not want to spend more on education.

The net enrolment rate at matriculation for boys in Balochistan is only 18pc and just 9pc for the girls in the province. And this is supposed to be a federation!

Any government, all governments, any society, all societies, should feel ashamed at these numbers. But we don’t. We are celebrating our ‘achievements’.

This is a quote from the education chapter in the Economic Survey. “Cumulative education expenditures by federal and provincial governments in FY25 (July to March) were estimated at 0.8pc of GDP. Expenditures on education-related activities during FY25 decreased by 29.4pc…”. They decreased from Rs1,251.06 billion to Rs899.6bn. Of course, there will be some spend from April to June but will it be 30pc? Unlikely. So, expenditure on education has gone down in nominal terms too. In real terms, given inflation, the drop would be much larger. And now we are spending only 0.8pc of our GDP on education, whereas UN agencies recommend spending a minimum of around 4pc of GDP on education. And the manifestoes of all major political parties promise that education expenditure will increase to 4pc of GDP.

The figure of 0.8pc includes all vanity projects such as the Daanish schools and the laptop schemes, especially in the federation and Punjab. I am sure it includes a portion of advertising spend of the provinces as well. But if you ask the ministers, the chief ministers or the prime minister, they will tell you, and emphatically so, that education is a top priority for their governments.

The Economic Survey headlines the news that the country now has 269 universities: 160 public sector and 109 private sector universities. But it does not dwell too much on the fact that the Higher Education Commission has not been given more resources for the new public sector universities. Some of the universities, even the older and bigger ones, are facing severe financial difficulties. Their budgets from the HEC have been more or less stagnant. Some cannot even make payrolls and have to cut pension payments. Some of the new universities in the public sector have not been given any support at all by the HEC. The government has done nothing to address these concerns. But launching new universities has been a priority.

The dialogue on education is quite broken. It is clear that governments — federal and provincial — do not want to spend more on education or on fixing the public sector education system. They believe they do not have the resources for it, nor do they have the patience and, possibly, the ability for medium- to long-term reforms. It is also clear that, given the thriving private sector in education, it is only the poor who depend on public sector provision of education and so, from a political point of view, there is no pressure on the government to fix education either: the poor are even more voiceless in this country than the middle- and upper-income classes.

And yet, in terms of rhetoric and public pronouncements, the government cannot be politically incorrect to admit all of the above. So, it will continue to pay lip service to the ‘education emergency’ and the ‘right to education’. And this game is bound to continue. Who will suffer? The young of the country and, therefore, the future of the country. But, for those in power, hunooz dilli dur ast, reality has not set in and political horizons are too short.

The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at Lums.

Published in Dawn, July 4th, 2025

• Two-judge bench says prosecution’s evidence shows PTI founder played a role in violent attacks
• Ex-PM’s refusal to submit to polygraph tests ‘hindered investigation’

LAHORE: The Lahore High Court (LHC) has ruled that the PTI founder, Imran Khan, was involved in the conspiracy and abetment of violent attacks on May 9, 2023.

In a detailed verdict, a two-judge bench noted that the prosecution has evidence that reflected Mr Khan’s role in the violence that broke out following his arrest in Islamabad.

The argument by Mr Khan’s counsel that he was in jail when the violent attacks took place on May 9 “is of no help to him,” ruled Justice Syed Shahbaz Ali Rizvi and Tariq Mahmood Bajwa, who had dismissed the PTI founder’s bail application on June 24.

Mr Khan had sought bail in eight cases of riots, including the attack on the Lahore Corps Commander’s House.

In its detailed verdict, the bench reproduced the statements of two police officials and prosecution witnesses, who claimed to have secretly attended PTI’s meetings wherein the party’s founder allegedly gave instructions to other leaders to attack military installations in case of his imminent arrest from the Islamabad High Court.

The meetings were held at a rest area of Chakri, Rawalpindi, on May 4 and at Zaman Park residence of Imran Khan on May 7-9, 2023.

The bench observed that the witnesses’ statements cannot be termed belated.

The bench held the statements “prima facie reflect the conspiracy and abetment” for the offences committed on May 9 were perpetrated by Mr Khan.

His role in the violence attracted Sections 120-B (punishment for criminal conspiracy) and 121-A (conspiracy to commit offence of waging or attempting to wage war against the country) of the Pakistan Penal Code.

“We have also noticed that the effect of the petitioner’s criminal conspiracy/abetment and the words uttered by him resulted in loss of lives and the state property,” the bench observed adding the case of Mr Khan, being PTI’s leader, was “distinguishable” from the cases of those who have been granted bail by different courts.

The bench noted that the prosecution has audio and video evidence, which required forensic analysis.

However, despite successive efforts by the investigating officer, Mr Khan refused polygraph and photogrammetric tests, which hindered the investigation and reflected his “evasive conduct”.

Based on these observations, the judges stated, “We are not inclined to grant post arrest bail to the petitioner and being so, this petition is dismissed.”

The cases against Mr Khan pertained to attacks on Askari Tower at Liberty Chowk, offices of PML-N in Model Town, Shadman police station and setting fire to police vehicles near the corps commander’s house and violence at Sherpao Bridge.

Published in Dawn, July 4th, 2025

• Flash flood risk in northern areas from July 7-12
• Heavy rain forecast across all provinces, GB and AJK
• Second monsoon spell expected to affect most Punjab districts
• PDMA Balochistan warns of flash floods in 20 districts
• Tourists advised to avoid high-risk areas; citizens urged to stay indoors

RAWALPINDI / LAHORE / QUETTA: The National Emer­gencies Operation Centre (NEOC) of the National Disa­ster Management Authority (NDMA) has issued impact-based weather alerts ahead of predicted monsoon activity and a strong westerly wave expected to affect multiple regions of the country from July 6 to 10. Flash flood risks are also anticipated in northern areas from July 7 to 12.

Isolated rain and thunderstorms are expected in Islamabad and across Punjab, including Rawalpindi, Attock, Jhelum, Chakwal, Mianwali, Sargodha, Khushab, Gujran­wala, Gujrat, Faisalabad, Lahore, Kasur and Okara from July 6 to 10.

Widespread moderate to heavy rainfall is forecast across northern and central Punjab, while southern districts such as Multan, Khanewal, Bahawalpur, Bahawalnagar, Rahim Yar Khan, and Dera Ghazi Khan may receive low to moderate showers.

Click to see more

In Khyber Pakhtunkhwa, heavy rain and thunderstorms are expected in Dir, Swat, Chitral, Kohistan, Shangla, Buner, Battagram, Swabi, Nowshera, Charsadda, Mala­kand, Mansehra, Abbottabad, Peshawar, Mardan, Haripur, Bannu and Kohat.

Gilgit-Baltistan and Azad Jammu and Kashmir will likely experience moderate to heavy rainfall, particularly during evening and night hours. Flash flood threats persist in Gilgit, Skardu, Hunza, Astore, Diamer, Ghanche, Shigar, Muzaffarabad, Neelum Valley, Rawalakot, Haveli and Bagh.

The expected weather conditions could result in flash flooding in streams and nullahs, landslides, road closures and disruptions to power and communication lines.

In Sindh, isolated to moderate rainfall is expected in Sukkur, Nawabshah, Kash­more, Hyderabad, Karachi, Thar­parkar, Mirpurkhas, Umerkot, Sanghar, Jamshoro, Tando Allahyar, Thatta, Badin and Mithi. Heavier rainfall is likely in Ghotki, Khairpur, Shikarpur, Larkana, Jacob­abad and Dadu, potentially leading to urban flooding, traffic congestion and infrastructure damage.

Scattered to heavy rainfall is also forecast in Balochistan, including Quetta, Zhob, Ziarat, Kalat, Khuzdar, Awaran, Bar­khan, Jaffarabad, Kohlu, Sibi, Dera Bugti, Loralai, Lasbela and Naseerabad. Risks include waterlogging, traffic disruption and structural damage from strong winds and lightning.

The NDMA has urged the public to adopt precautionary measures, including avoiding unnecessary travel, staying indoors during severe weather and securing loose items and vehicles. Tourists are strongly advised against visiting high-altitude or flood-prone areas during the forecast period.

Local authorities have been directed to ensure the readiness of response teams, drainage clearance and public awa­re­ness campaigns. Motorists have been warned to avoid driving through flooded roads and underpasses. Emergency services remain on high alert for potential rescue and evacuation operations.

Click to see more

The NDMA asked citizens to monitor its advisories and use the ‘Pak NDMA Disaster Alert’ app for real-time weather updates and safety information.

Punjab on high alert

The Provincial Disaster Management Authority (PDMA) Punjab has issued its own alert ahead of expected monsoon rains from July 5 to 10, warning of urban flooding and rising river levels.

It said the second monsoon spell is expected to affect most districts, including Rawalpindi, Murree, Galiyat, Attock, Chakwal, Jhelum, Mandi Bahauddin, Gujranwala, Hafizabad, Wazirabad, Lahore, Sheikhupura, Sialkot, Narowal, Sahiwal and Faisalabad. Thunderstorms with heavy downpours are predicted in Okara, Kasur, Khushab, Sargodha, Bhakkar, Mianwali and southern districts such as Bahawalpur, Multan and Dera Ghazi Khan.

PDMA Director General Irfan Ali Kathia warned of potential flooding in hill torrents and rain drains from July 7 onwards. Urban flooding may also impact northern and central Punjab.

Departments including the Water and Sanitation Agency, Rescue 1122, health, irrigation and local government have been directed to remain on high alert. Citizens have been advised to stay indoors during storms, avoid travel and keep children away from waterlogged areas and electrical hazards.

PDMA’s recent rainfall data shows Jhelum recorded the highest precipitation at 31 millimetres in the past 24 hours, followed by Mangla (29mm) and Attock (14mm), with minimal rainfall in Rawalpindi, Chakwal, Sialkot and Multan.

New monsoon spell in Balochistan

The PDMA Balochistan has also issued a weather alert for a fresh monsoon spell expected to hit 20 districts from July 4 to 8 July.

Heavy downpours are forecast in Sherani, Zhob, Ziarat, Musakhail, Duki, Loralai, Harnai, Sibi, Barkhan, Nasirabad, Usta Muhammad, Kalat, Lasbela, Surab, Khuzdar, Awaran, Sohbatpur, Jaffarabad, Dera Bugti and Kohlu, with flash floods likely in seasonal streams and rivers.

Tourists have been advised to avoid unnecessary travel, and residents are urged to stay away from dams and picnic spots. Deputy commissioners have been instructed to monitor the situation closely and deploy heavy machinery on key roads to maintain access.

PDMA district teams have been ordered to prepare for rescue and relief operations in the event of any damage caused by the rains.

Published in Dawn, July 4th, 2025