Rupee crashes to historic low at PKR 287.29 against dollar

On Tuesday, the Pakistani Rupee (PKR) hit a historic low of PKR 287.29 to the US dollar in the interbank foreign exchange market.

The local currency declined by PKR 2.25 from the previous day’s closing rate of PKR 285.04.

Experts attribute this drop to the delay in the International Monetary Fund (IMF) loan program and the decrease in foreign exchange reserves, which have fallen to $9.816 billion as of March 24, 2023, down $323 million from the previous week’s $10.139 billion.

This decline is significant as Pakistan’s foreign exchange reserves had reached a record high of $27.228 billion on August 27, 2021, before declining by $17.412 billion.

Despite the decrease, Pakistan’s State Bank’s official reserves provide nearly one month’s import cover, although it should ideally maintain reserves equivalent to three months’ worth of import payments.

The decrease in the value of the PKR can be attributed to economic challenges, political uncertainties, and depleting foreign exchange reserves. Even though the PKR had strengthened against the dollar due to a significant contraction in the current account deficit, a lack of inflows put pressure on the currency.

Official data showed that exports fell by 8.65% and workers’ remittances dropped by 11% during the first eight months (July-February) of 2022/2023.

Pakistan has been experiencing a foreign exchange crisis due to a decrease in foreign exchange reserves, a widening current account deficit, and delays in obtaining loans from international organizations such as the IMF.

The country’s efforts to reduce the current account deficit have been hampered by a decrease in exports and workers’ remittances. To address the crisis, Pakistan has been seeking loans and financial assistance from international organizations such as the IMF.

However, 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.