Pakistan's rupee is only as strong as what Pakistan produces

What the 5,000 rupee note actually promises

Muzamil opens with a small test. Without looking it up, do you know what is written on the notes you spend every day? He says almost everyone he has asked in real life does not.

He reads from a 5,000 rupee note. It is issued by the State Bank of Pakistan, guaranteed by the Government of Pakistan, and it promises to pay the bearer on demand. “This is basically a contract,” he explains. The note was once a claim the holder could take to the State Bank and exchange for a stipulated amount of gold.

To show why that matters, he walks back through history. First came barter: one person grows wheat, another raises chickens, and they swap. As economies grew more complex, a scarce and valuable metal stepped in as the go-between. A farmer who harvests once a year could sell his wheat for gold and spend it slowly over the year. Later, central banks offered to hold the gold and hand out paper contracts in its place. People passed the contracts from hand to hand, and those contracts became currency, pegged to gold.

Then the gold link was cut. Muzamil says America did it first, a story he saves for a separate episode, and Pakistan did the same. The note still promises to pay the bearer. It no longer says what.

Cash is a claim on value, and value comes from production

Strip away the cash and the gold, Muzamil argues, and what is left is production. The early farmer’s wealth was his wheat. He did not create gold out of nothing. “There always has to be something productive behind any money or wealth being created.”

His clearest Pakistani example is property. On one side are plots, the game he says the whole country plays: buy a plot, wait, sell it for double or triple. On the other side are buildings, apartments and homes. When money goes into a building, workers are hired, materials are bought, and people end up living near their offices and working more easily. Overall productivity rises.

The plot game, in his view, works like a casino. No human effort goes into it and nothing gets easier for anyone. Money pools from many people and a few of them win.

He applies the same lens to personal careers. People message him asking which profession pays the most. He says that is the wrong question. The right one is what humanity needs, where the demand is, and whether you can meet that need well and fast. “If I am solving that requirement, and solving it well, converting it into money is very easy.”

A household that mops all day and still goes hungry

Muzamil builds a picture of one large household as a closed economy. In the first version, one set of cousins grows wheat and raises animals, a second grows cotton and makes cloth, and a third makes bricks and adds a floor to the house each year. Food, clothing and shelter all get made. Money passes between them and the household runs.

In the second version, nobody leaves the house. One cousin mops all day. Another runs around supervising. A third whispers news into everyone’s ear like a one-man media outlet. Another dusts from morning to night. They all work hard and all get paid. At the end of the month they are hungry, unclothed and crowded, and they blame the head of the household.

“Just because you are doing something in your life does not mean you are valuable,” he says. Being paid for it does not make it valuable either. The question to ask of any work, and of Pakistan’s economy, is whether it produces something people need.

Consumption growth versus production growth

This leads to the distinction people hear often: Pakistan is a consumption economy and needs to become a production economy. Muzamil makes it concrete.

Give a household 10,000 rupees and it can buy wheat. GDP rises by 10,000 and the year looks like growth. By year’s end the wheat is gone and the household is back where it started. Now flip it. The household spends 1,000 on seed, 3,000 on fertilizer and 3,000 on a few chickens, and puts everyone to work. The growth figure is the same. Next year, though, it no longer needs another 10,000 rupees to eat.

He gives a policy example from the Musharraf era: cheap domestic gas sent into cars as CNG. In his reading that was consumption. The same gas sent to factories, or used to make cheap electricity for industry, would have built capacity. He sees the pattern across governments: borrow, hold the dollar down, import cheap cars and goods, show 5 or 6 percent growth, and then watch the market crash a year or two later.

Why the dollar keeps rising

Set the rupee aside for a moment, Muzamil says, and the dollar rate mostly reflects how much a country produces for the world against how much it wants to buy. Pakistan’s population is growing, getting more educated and wanting more. Imports rise faster than exports, so the dollar rises.

He asks people to accept a long-run trend. Look at about 30 years of the rate, he says, and the rupee loses roughly 7 to 9 percent a year. “Stop abusing politicians over this. This is your country’s problem, a productivity problem.” The fight to hold the dollar down is what creates the pump and dump, the boom and bust.

“Whether the dollar is 1,000 rupees or 5,000 or 10,000 makes no difference to me,” he says. “What matters is my purchasing power, my productivity, and how many things I can buy with it.”

He illustrates purchasing power with bread. Say you earn 100 rupees and bread costs 10. Next year bread doubles to 20, but your pay rises to 400. Bread feels twice as expensive, yet it has fallen from 10 percent of your income to 5. In the same way, a 100,000 rupee salary at 100 rupees to the dollar is 1,000 dollars of work. A 400,000 salary at 200 rupees to the dollar is 2,000 dollars of work.

He notes that the IMF projects the dollar’s real value at around 311 to 312 rupees by June. That will bring short-term pain, he says, and the rate should be allowed to settle where it belongs while the country works on output and exports.

Money printing and a government living on loans

Supply and demand is only part of the story. Muzamil’s second driver is printing. If 100,000 rupees chase 1,000 dollars, each dollar costs 100 rupees. Print until 400,000 rupees chase the same 1,000 dollars, and each dollar costs 400.

His figures: Pakistan’s rupee money supply was about 18 trillion in 2020 and is about 36 trillion today. “Tell me honestly, has productivity doubled in Pakistan? Have our chickens doubled? Has our wheat doubled?” He links the inflation the country has seen to that printing.

He then explains where the money goes. The government is Pakistan’s largest employer. Its costs are services, ministries, salaries and pensions. Its revenue comes from state companies, most of which he says lose money, and from taxes. Today, in his telling, the government’s revenue goes to interest on its loans. He cites last July, when interest due was 537 billion rupees and income was 381 billion.

So the state borrows to pay interest, then borrows more to pay salaries. Banks in Pakistan, he says, lend about 90 percent of their money to the government, when elsewhere banks lend to the private sector where productivity grows. He describes the whole arrangement as running “like a drug addict.”

The hyperinflation risk and the reforms he wants

Muzamil’s fear is a spiral. Print money and spend it, prices rise, people demand higher pay, the state prints more, and prices rise again. He points to Lebanon and Venezuela as recent cases where this ended in hyperinflation. “I am not trying to scare anyone. I am not fear mongering. I am only saying this is the actual reality.”

To get out, he argues, Pakistanis cannot keep asking for cheap electricity, cheap gas and a cheap dollar. He lists the basic steps:

• Raise tax. Across Asia, he says, about 20 percent of GDP goes to taxes. In Pakistan it is about 10 percent. He wants that doubled, with taxation made more equitable and relief for the poor.
• Cut loss-making state entities.
• Size government by its output. If a ministry has 25,000 or 30,000 people, ask what they produce, and accept that some jobs will go.
• End subsidies in certain areas, since they add to cost.

He insists people pay tax either way. If you skip 17 percent in tax, the government prints the shortfall, and roughly 17 percent inflation erodes your money anyway. He calls that a simplified picture, but the point stands: “One way or the other, you are taxed.”

Production over vanity metrics

Muzamil closes by restating the core idea. “Cash is a representation of value. Cash itself holds no value whatsoever.” Policy decisions keep shrinking what that cash is worth, so people need to think in terms of value and productivity.

He gives one more example. If the country wanted a metro bus, he says, Islamabad was the wrong place for it. It belonged in Faisalabad, Multan or Sialkot, where industry is and where a poor worker could ride it to a factory. He admits he feels the pull of comfort too, visiting Europe and wishing for the same luxury at home. His answer to himself is to think bigger about the country’s real problems first.

He previews the next episode: Pakistan’s electricity and energy problems, and how an underdeveloped economy climbs step by step. Growth is evolutionary, he says. A country does not jump straight from a thin IT sector to building AI.