The Pakistani rupee continues to slide with USD to PKR hitting another all-time low on Wednesday. At the start of the trading today, the US dollar vs Pak rupee hit a record low of Rs. 161.50 in the interbank market.
Soon after trading opened, the USD To PKR exchange recorded a major crash with the US dollar rising by Rs 5.2. The US dollar vs Pak rupee was at Rs. 141.5 on May 15, indicating that the Pakistani currency has dropped by over Rs. 20 against the US dollar in over a month. The drop in the Pakistani rupee over the last two months has primarily been triggered by the $6 billion bailout package from the International Monetary Fund. The package reportedly comes with strict conditions, including a “market determined” exchange rate.
Today’s drop in the USD to PKR exchange rate comes as a surprise to many. Last week, the governor of the State Bank of Pakistan (SBP), Dr. Reza Baqir, expressed confidence in Pakistan’s economic situation.
“We have adopted a market-based policy and SBP will monitor the demand and supply within the economy,” he said at a press conference, adding that the “recent depreciation in rupee is seasonal.”
This new USD to PKR rate comes as good news for Pakistani expatriates who want to remit money back home. According to Gulf News, Pakistani expatriates in the UAE are expected to send more money as the Pakistani rupee vs UAE dirham rate has dropped to an all-time low of Rs. 43.48, compared to Rs. 42.4 on Tuesday. The Pakistani rupee vs UAE dirham was around Rs. 21 UAE dirham in May 2009.
On the other hand, for the Pakistani economy, it is another bad omen. Pakistan’s economy is going through its worst crisis so far with rising debt, soaring inflation and falling reserves. The IMF has long been asking the country to loosen its grip on the rupee and estimated that the real exchange rate was overextended by about 20% in 2017.
According to data from the State Bank, the country’s foreign exchange reserves were a mere $8.984 billion (or less than three months of import payments) on May 3.
As can be expected, the opposition parties are blaming the government for the economic crisis. Maryam Nawaz Sharif, vice president of the Pakistan Muslim League-Nawaz (PML-N), criticized the ruling party for the dropping rupee.
“Dollar soars to Rs160.5 interbank. Pakistan economy at the verge of total collapse,” she tweeted, adding that the damage would be irreparable.
Special Assistant to the Prime Minister Iftikhar Durrani blamed previous governments for the current crisis.
“The dollar climbed steeply during the era of the Pakistan Muslim League-Nawaz (PML-N), as it went up to Rs26 from Rs96 to Rs122,” he said in a statement in May, according to Profit.
He also noted that the interbank dollar rate rose from Rs. 64 to Rs. 96 while the Pakistan People’s Party (PPP) was leading the country.
Since Pakistan Tehreek-e-Insaf (PTI) came to power about 10 months ago, the US dollar vs Pak rupee rate has dropped by almost 30%. On the day Imran Khan was sworn in as the prime minister, Aug. 18, 2018, the USD To PKR rate was Rs. 123.35.
The Pakistani rupee is expected to drop further.
“The rupee is likely to fall to Rs175-Rs180 levels by the end of this year,” Adnan Sheikh of Pak Kuwait Investment Co told Profit.
Further, the executive said that depreciation in the rupee is inevitable because the country will have to buy dollars for repayments. There are speculations that the USD To PKR rate will hover between 180 and 190 by the year’s end.
However, not all things are going against Pakistan. The country received an IMF bailout last month, the 22nd since it joined the IMF in 1950. Additionally, Qatar will soon give $3 billion in aid to the country via deposits and direct investments. The announcement of the $3 billion package came a day after Qatar Emir Sheikh Tamim bin Hamad Al Thani concluded his visit to Pakistan. During his visit, he met Prime Minister Imran Khan in a one-on-one meeting.
Before Qatar, Saudi Arabia and the United Arab Emirates pledged similar aid packages to Pakistan. The UAE has provided $1 billion, while Riyadh gave a $3 billion loan to Pakistan. The country is also indebted to China, and its economy is expected to contract further this year. Pakistan owes at least $10 billion in debt to China for the construction of the Gwadar port and other projects.