Count your exchange rate losses

Count your exchange rate losses
By Babu Das Augustine, Banking Editor Published: October 01, 2007, 00:41

Dubai: Did your employer recently give you a 10-15 per cent salary raise and a bit of motivational talk on your performance?

You might be surprised to find that your increment doesn't mean much. And if your employer didn't consider you for a raise in the last 18 months, you have a serious problem as your earnings have depreciated in the range of 23 to 31 per cent, depending on the currency in which you are saving and spending your money.

UAE residents already reeling under the rising cost of living are also losing heavily due to exchange rate losses.

Last year, the UAE's inflation hit a 19-year high of 9.3 per cent and the inflation this year is estimated around the same level by Standard Chartered Bank.

The exchange rate data for the last 19 months suggest that various groups of expatriates living in the UAE lost in the range of 12 to 21 per cent in exchange rate losses along (see table).

In simple terms it means, your earnings in purchasing power in your home currency is down about 12 per cent if you are earning in rupee, 15 per cent down in the peso and 20 per cent and 18.7 per cent in the euro and the sterling, respectively.

With the exchange rates of dirham falling against their home currencies, expatriate salary earners who have fixed commitments such as mortgages, bank loans and college fees are forced to dip into their savings or borrow to send money home.