On July 5, 2017, the Pakistani currency fell by over 3 percent in what was the currency’s largest decline in nine years. This was like the distant thunder that warns of a looming storm, but its importance was missed as all eyes were drawn on the ongoing Panama Papers investigation in Pakistan and the Afghanistan policy review in the United States.
While there has been a lot of optimism around Pakistan’s economic prospects, dark clouds have been gathering over the economy. Economists within the country have been sounding the alarm for months but their warnings have been ignored, if not unashamedly dismissed by policymakers.
The country’s central bank slowly and subtly sounded the alarm as well, but to no avail. Left with no other option, it did what it had to do: allow the rupee to depreciate. A decision was made to not make the phone