What Is Devaluation Of Money?


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Nouman Umar Profile
Nouman Umar answered
Devaluation means officially lowering the value of currency in terms of foreign currencies. There is a difference between devaluation and exchange depreciation. Devaluation is the result of official government action. Depreciation or decline in the rate of exchange of one currency in terms of another is due to market forces. Substantially devaluation and depreciation both refer to the reduction of international currency in terms of foreign currencies. When the rupee was delinked from the dollar and floated against a basket of currencies on Jan 8, 1982, the rupee parity stood rupees 9.90 to a dollar. The State Bank of Pakistan since then has devalued the rupee a number of times. The rupee spot buying rate to dollar as on 1.6.2000 stands at rupees 54.

There could be many motives of the devaluation. It stimulates exports of commodities. It restricts import demand for goods and services. It helps in creating a favourable balance of payments. Almost all the countries of the world have devalued their currencies at one time or the other with a view to achieving certain economic objectives. During the great depression of 1930 devaluation was carried by most countries of the world for the objecting of correcting over-valuation of currencies.
Anonymous Profile
Anonymous answered
Devaluation refers to the decrease in the value of money. For example: To buy a single dollar we spend Rs 50. To buy the same single dollar if we pay Rs. 100 then the rupee is devalued.

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