Karachi, August 24, 2023 – The US dollar achieved a historic milestone on Thursday, breaching the PKR 300-mark for the first time in Pakistan’s history at the close of the Interbank foreign exchange market.
The exchange rate recorded a decline of 58 paisas in the value of the Pakistani Rupee (PKR), ending at PKR 300.22 to the dollar, compared to the previous day’s closing rate of PKR 299.64.
This decline marks a continuation of the Pakistani Rupee’s depreciation trend against the US dollar, a trend that has persisted since the caretaker government assumed office on August 14, 2023.
The rupee has witnessed a substantial devaluation, losing PKR 11.76 in just over two weeks since it closed at PKR 288.49 on August 11, 2023.
High Demand for US Dollar: A significant surge in demand for the US dollar, primarily driven by import requirements and corporate payments, has exerted immense pressure on the Pakistani Rupee. The increased demand for the greenback has emerged as a leading cause of the rupee’s depreciation.
Foreign Exchange Reserves Concerns: Apprehensions regarding Pakistan’s dwindling foreign exchange reserves and impending government repayments for foreign debts have further exacerbated the rupee’s decline. The insufficient reserves have made it increasingly challenging to maintain stability in the local currency.
READ MORE: Pakistani Rupee Hits Historic Low of PKR 299.01 to US Dollar at Interbank Closing
SBP’s Policy Adjustment: A recent policy adjustment by the State Bank of Pakistan (SBP), allowing commercial banks to initiate import payments through letters of credit, has added to the stress on the already fragile rupee. This policy shift has accelerated the depreciation process.
Foreign Exchange Reserves: Although there has been a slight improvement in Pakistan’s foreign exchange reserves, the figures remain far from robust. As of the week ending August 11, 2023, the State Bank of Pakistan reported foreign exchange reserves of $13.38 billion, representing a $40 million increase compared to the previous week’s reserves of $13.34 billion. However, this level is significantly lower than the peak of $27.2 billion observed in August 2021.
READ MORE: Rupee Plunges to PKR 297.13 Against Dollar, Nears Historic Low in Interbank
The rapid depreciation of the Pakistani Rupee raises significant concerns about the country’s economic stability and its ability to manage its foreign exchange requirements. As the rupee hovers near the PKR 300 mark against the US dollar, it underscores the urgent need for comprehensive economic measures to address the root causes of this depreciation and to restore confidence in the local currency.
Stakeholders and financial authorities will closely monitor these developments and seek solutions to alleviate the pressures on the Pakistani Rupee while working to support the country’s financial stability. The situation emphasizes the need for strategic steps to bolster the Pakistani economy and safeguard against further depreciation of the national currency.
READ MORE: Rupee Dips Sharply Against Dollar, Hits PKR 295.78 Mark in Interbank Trading
