Economist Ashfaq Tola proposed setting the Pakistani rupee at 250 per U.S. dollar in a model budget released this Sunday [1].

The proposal seeks to stabilize the national currency to combat rising costs of living and attract foreign exchange. By fixing the exchange rate and incentivizing legal money transfers, Tola aims to provide a predictable economic environment for trade and investment.

Tola expects these measures to reduce inflation by up to six percent [1]. To stimulate the flow of foreign currency, the model budget includes a remittance bonus of Rs10 for every U.S. dollar sent through official banking channels [2].

Beyond currency management, the plan calls for comprehensive tax reforms to address persistent fiscal deficits. Tola said the government should prioritize the reduction of losses within the energy sector, a long-standing drain on the national treasury, and accelerate the privatization of state-owned enterprises [1, 3].

These structural changes are designed to work in tandem with the exchange rate proposal. By reducing the cost of energy and improving tax collection, the government could potentially sustain the proposed currency peg without depleting foreign exchange reserves [1, 2].

The model budget emphasizes that currency stability cannot be achieved through exchange rate adjustments alone. Tola said the strategy must include a broader push for efficiency in public services and a reduction in government spending to ensure long-term economic viability [3].

“Tola expects these measures to reduce inflation by up to six percent.”

This proposal represents a shift toward a managed exchange rate regime intended to break the cycle of currency devaluation and inflation. If adopted, the remittance bonus would target the 'grey market' or informal hawala channels, attempting to bring billions of dollars back into the formal banking system to strengthen the central bank's reserves.