The Pakistani rupee (PKR) saw a recovery of PKR 1.81 to end at PKR 286.62 against the dollar on Wednesday after falling to a historic low a day earlier.
The exchange rate witnessed the appreciation in rupee value from last days closing of PKR 288.43 to the dollar, the historic lowest level of rupee, in the interbank foreign exchange market.
The currency had depreciated due to a lack of inflows and delays in funds from the IMF, as well as political uncertainty surrounding the provincial elections. However, experts noted that Eid-related inflows and relaxation in instructions by the State Bank of Pakistan (SBP) regarding export proceeds helped the recovery of the rupee value during the day.
The recent depreciation of the PKR can also be attributed to the cancellation of the finance minister’s visit to the US to attend summer meetings of the International Monetary Fund (IMF) and the World Bank, despite Saudi Arabia’s assurance of providing assistance to Pakistan.
On March 31, 2023, the State Bank of Pakistan announced a decrease of $55 million in the country’s foreign exchange reserves, falling to $9.76 billion, a decline from $9.815 billion the week before.
Although the foreign exchange reserves of the State Bank of Pakistan still exceed the level required to provide more than one month’s worth of import cover, they have fallen below the ideal level of foreign exchange reserves equivalent to three months’ worth of import payments.
The decline in the value of the PKR can be attributed to economic challenges, political uncertainties, and depleting foreign exchange reserves.
Despite seeking loans and financial assistance from international organizations such as the IMF, delays in obtaining these loans have prolonged the crisis, and the country continues to face challenges in managing its foreign exchange reserves and stabilizing the value of its currency.
Pakistan has witnessed an 11% decline in remittances during the first nine months (July-March) of fiscal year 2022/2023 to $20.53 billion, compared to $23.02 billion during the same period last fiscal year. The country’s foreign exchange crisis is a matter of concern, and experts believe that swift measures are needed to stabilize the currency and attract more foreign investment.