At midday on Monday, the Pakistani rupee crossed Rs270 against the US dollar for the first time, setting a new low, according to The Express Tribune. On the third day of decline, there was a new devaluation of Rs7.50 (2.77%) in Pakistani rupees. The news breaks as Pakistan allegedly experiences its “worst-ever economic crisis.”
As the government gave over control of the exchange rate to comply with demands from the International Monetary Fund, or IMF, for a bailout, Pakistan’s currency resumed its catastrophic downward spiral for a third day in a row, falling to a historic low of 270 versus the US dollar. The cash-strapped country is in severe need of financial assistance to get through the current economic downturn.
On the third day of the free collapse, the value of the currency fell by 7.50 PKR (or 2.77%) to a new record low of 270.10 PKR against the US dollar, according to The Express Tribune.
In the three days after Wednesday’s finish at 230.89 PKR, it has fallen by a total of 39.21 PKR (or 14.50%).
This devaluation, according to experts, is the result of the economy’s high demand and limited supply of the dollar.
Yousuf Rahman, head of research at KASB Securities, told The Express Tribune that there was a “significant imbalance between demand and supply of the dollar in the market,” forcing importers to pay 270 Pakistani rupees for each dollar.
To restart the delayed International Monetary Fund (IMF) loan program, the government lifted an unofficial cap on the USD-PKR exchange rate, which resulted in a dramatic decline in the value of the Pakistani rupee.
Pakistan needs to finish the ninth review of a $7 billion IMF program to get the $1.2 billion tranche as well as further funding from allies and other multilateral lenders.
On Sunday, Pakistan also disclosed a 35 rupee hike in the cost of gasoline and diesel amid the pandemonium in the markets. Ten minutes before the price increases went into effect, Pakistan’s Finance Minister Ishaq Dar made a televised address in which he also announced price increases of 18 rupees for kerosene and light diesel fuel.
According to the Dawn newspaper, Finance Minister Ishaq Dar stated that despite rising costs internationally and the depreciating value of the rupee, “on orders from Prime Minister Shehbaz Sharif, we have decided to increase the minimum price of these four products.”
The oil and gas regulatory authority’s proposal led to the price increase.
The Finance Minister stated, “They indicated there were allegations of artificial shortages and hoarding of fuel in anticipation of price rises – hence this price increase is being done promptly to fight this.”
To comply with the IMF’s requirements, steps must be taken, including boosting taxes and the price of fuel and other essentials, which, combined with the current currency crisis, could increase inflation.
