Pakistan’s currency tumbled to a record low of Rs 255.43 against the dollar, as the country battles a shortage of foreign exchange reserves and a food crisis. The authorities hope that the decline in the rupee will win approval from the International Monetary Fund for much-needed financial aid.
Pakistan, it seems, is freefalling. As the Shehbaz Sharif-led country grapples with skyrocketing food prices and hours-long blackouts, the nation’s currency tumbled to a record low on Thursday.
Pakistan’s rupee plummeted to a record low of Rs 255.43 against the dollar in the interbank market on Thursday — a slip of 9.61 per cent, the biggest one-day drop in over two decades. It was the largest single-day decline in both absolute and percentage terms since the introduction of the new exchange rate system in 1999, Ismail Iqbal Securities’ Head of Research Fahad Rauf was quoted as saying by Dawn newspaper.
The historic rupee slide comes a day after foreign exchange companies removed its cap on the exchange rate, in order to avail much-needed loans from the International Monetary Fund (IMF) to rescue the crisis-stricken economy.
When the country was struggling economically back in 2019, then Pakistan prime minister Imran Khan had brokered a multi-billion dollar package from the IMF. However, the package remained in limbo, as Islamabad failed to follow market-based exchange rate.
Now, as the country’s economic crisis worsens and the country’s foreign reserves is dangerously low — it has only enough to pay for around three weeks of imports —the authorities withdrew the cap on the exchange rate and officials said it would continue to let the currency drop slowly in the open market.
Naveed Vakil, chief operating officer at AKD Securities Pvt Ltd in Karachi, was quoted as telling Bloomberg, “Pakistan is showing willingness and finally conceding to IMF demands to secure funds after a long period of reluctance. The IMF is firmly positioned on Pakistan maintaining a market-based exchange rate and today’s move has given markets the confidence that officials will now complete the remaining required conditions to continue the IMF program.”