Karachi, August 23, 2023 – In a startling development, the US dollar has nearly reached the unprecedented level of Pakistani Rupees (PKR) 300 during intraday trading at the interbank foreign exchange market on Wednesday.
The spot rate of the US dollar was recorded at PKR 299.75 during intraday trading, marking a significant increase of 74 paisas compared to the previous day’s closing rate of PKR 299.01. This marks a historic high for the greenback since Pakistan’s independence on August 14, 1947.
READ MORE: Pakistani Rupee Hits Historic Low of PKR 299.01 to US Dollar at Interbank Closing
Factors Contributing to Rupee Depreciation
Financial experts have identified several critical factors contributing to this alarming depreciation of the Pakistani Rupee:
Increased Demand for the US Dollar: A surge in demand for the US dollar, primarily driven by import requirements and corporate payments, has exerted immense pressure on the local currency. This heightened demand has been a key driver of the rupee’s depreciation.
READ MORE: Rupee Plunges to PKR 297.13 Against Dollar, Nears Historic Low in Interbank
Foreign Exchange Reserve Concerns: Concerns over dwindling foreign exchange reserves and the looming government repayments for foreign debt have further exacerbated the decline of the rupee. Insufficient reserves have made it challenging to maintain the stability of the local currency.
State Bank of Pakistan’s Policy Adjustment: The 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 strain on the already fragile rupee. This policy change has accelerated the depreciation process.
READ MORE: Rupee Dips Sharply Against Dollar, Hits PKR 295.78 Mark in Interbank Trading
Foreign Exchange Reserves: While 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, a $40 million increase compared to the previous week’s reserves of $13.34 billion. However, this level is substantially lower than the peak of $27.2 billion observed in August 2021.
Challenges Ahead
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 need for comprehensive economic measures to address the root causes of this depreciation and to restore confidence in the local currency.
READ MORE: Rupee Maintains Firmness Against Dollar, Closes at PKR 294.92
Stakeholders and financial authorities will closely monitor these developments, seeking solutions to mitigate the pressures on the Pakistani Rupee and support the country’s financial stability.
