Karachi, July 20, 2023 – The Pakistani Rupee (PKR) experienced its fifth consecutive day of decline, reaching a closing rate of PKR 285.15 against the US dollar in the interbank foreign exchange market on Thursday.
The State Bank of Pakistan (SBP) released the latest exchange rate, showing a decrease of PKR 1.35 in comparison to the previous day’s closing rate of PKR 283.80 in the interbank foreign exchange market.
This continuous decline marks the fifth consecutive day of depreciation for the PKR against the USD, resulting in a total devaluation of PKR 8.69 during this period.
Currency experts attribute the recent slump in the rupee’s value to two primary factors. Firstly, it was a response to the International Monetary Fund’s (IMF) report on Pakistan’s loan program. The report painted a somber economic outlook for the country, warning of significant economic challenges despite foreign funding.
Secondly, the sharp depreciation is also linked to a surge in demand for import payments. The government’s conditions on import payments had caused a backlog in import consignments. However, the recent approval by the central bank has eased customs clearance procedures, and banks are now issuing letters of credit without restrictions.
It is noteworthy that the latest IMF loan agreement requires Pakistan to maintain a flexible exchange rate, allowing market forces to determine the rupee’s value. This move aims to establish a more balanced and market-driven approach to currency valuation.
In the midst of these developments, the SBP has observed substantial foreign inflows in the past week, bolstering the country’s foreign exchange reserves. Government officials are optimistic and anticipate the reserves to reach a promising $14 billion in the upcoming weeks.
The devaluation of the Pakistani Rupee against the US dollar reflects the economic challenges faced by the nation. The surge in import payment demand and subsequent clearance processes have contributed to the depreciation. However, with the government adhering to the IMF agreement, it aims to maintain a flexible exchange rate that can respond to market dynamics.
Market observers and experts will closely monitor the exchange rate fluctuations in the coming days. Additionally, the progress of customs clearance and the impact of foreign inflows on the country’s foreign exchange reserves will play a vital role in determining the rupee’s future trajectory.