In the process of keeping the cap on, one crucial factor emerged that was the difference in rates between the interbank and open markets that widened to Rs.15 to 20 in recent months. These pressures finally prompted the foreign exchange companies to lift the price cap on the dollar saying it had caused artificial distortions and created a black market, where the US currency was selling at higher rates. The situation came to a pass whereby the head of the State Bank was publicly chastised by the industrialists with some of them alleging corruption within the ranks of personnel of the central bank. The situation grew complicated with the protestations of trade and industry circles growing louder as their letters of credit were not honoured costing very dear to the importers and industry owners because they were compelled to spend large chunks of money owing to the demurrages incurred at the ports.

The economic experts are watching the outflows despite low imports and $2 billion inflows of remittances per month on average.Īfter consistent reluctance of the IMF to release the much-needed financial tranche as it was insisting on letting the price of dollar adjust according to the market requirement and the newly installed finance minister taking the opposite course of action, the rupee suffered the consequences.

It is also mentioned that there have been no significant inflows since June when China provided $2.5 billion. The shortage of dollars has started to negatively affect all sectors of economy, and many believe that the country would soon notice the shortage of petroleum products along with basic essential items like food items. Currency experts said the rupee was falling despite being managed by the State Bank of Pakistan (SBP). The stock market, beset by political uncertainty and worrying economic indicators, is also on the decline and fell in many sessions. The exchange rate had been primarily hit hard by a steep decline in the central bank’s foreign exchange reserves, which have shrunk to a near nine-year low of $4.34 billion. Moreover, due to tightly restricting imports the foreign exchange equivalent was hard to come by as on the one hand the country started hemorrhaging dollars as reportedly they were smuggled as well as hoarded and on the other hand letters of credit were not honoured creating shortage of crucial imports grid locking industry further exacerbating the economic woes.Īs the rupee continued to weaken faster than market expectations doubts and fears were mounting over the country’s economic health, particularly its ability to pay the import bill for essential items in the coming weeks. The new financial management insisted upon holding the value of rupee against dollar and capped it creating a booming grey market with the spread between official and non-official exchange rates of dollar wildly swinging between 15 to 20 rupees. This problem necessitated the change of government that brought in a new financial team reputed for its so-called wizardry in such matters but somehow it stalled the financial decision making. The rupee also suffered due to the acute political instability that has gripped Pakistan since the last many years. Pakistani rupee has plunged mercilessly to lows that are usually unbelievable causing serious harms to the national economy.Īs a consequence, the rupee has become the most depressed currency in the region and the fears are that crunch of dollars will further depreciate its value.

Dollar to pak rupee