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Think Tank Examines Reasons for Pakistani Rupee’s Historic Low

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The Pakistani rupee is grappling with a challenging period, hitting an unprecedented low against the U.S. dollar. According to the State Bank of Pakistan (SBP), the greenback reached a historic high of 299.01 rupees in the interbank market on Tuesday, marking a significant decline from its previous value. This article delves into the factors contributing to this devaluation, shedding light on the interplay of internal and external forces impacting the Pakistani economy.

 

Rupee’s Deterioration Continues

The Pakistani rupee’s struggle against the U.S. dollar persists as it faces another setback in its value. The rupee had already reached a record low of 298.93 in May, and now the decline has further deepened, reaching an all-time low. In the course of a single day, the local currency depreciated by 1.88 rupees or 0.63 percent against the U.S. dollar.

 

Contributing Factors Unveiled

A combination of internal and external factors is contributing to the rupee’s steep decline. Experts, including Sajid Amin Javed, an economist at the Sustainable Development Policy Institute, identify these forces. The demand from the International Monetary Fund (IMF) to bridge the gap between interbank and open-market rates has led to market-driven valuation, pushing the rupee into a downward spiral. This demand places immense pressure on the open market, thus creating a self-reinforcing cycle of depreciation.

 

Political Uncertainty and Global Dollar Surge

Javed emphasizes the multifaceted nature of the rupee’s decline. Notably, political instability within the South Asian nation is compounding the economic challenges. Additionally, the global surge of the U.S. dollar is a pivotal factor behind the devaluation. Javed highlights that nearly half of the rupee’s fall can be attributed to the strength of the U.S. dollar on the global stage.

 

Future Implications

As the Pakistani rupee continues its downward trajectory, the nation’s economy faces heightened volatility and uncertainty. The combination of IMF demands, political instability, and the strength of the U.S. dollar paints a challenging economic landscape. Experts and policymakers will be closely monitoring these dynamics to mitigate the impact and stabilize the rupee’s value.

 

Conclusion

The record-low value of the Pakistani rupee against the U.S. dollar reflects a complex interplay of internal and external factors. The IMF’s push for market-driven valuation, political instability, and the global strength of the U.S. dollar collectively contribute to the currency’s decline. While the challenges are significant, experts and policymakers remain engaged in finding solutions to stabilize the rupee’s value and navigate the evolving economic landscape.

Abu Bakr Alvi
Abu Bakr Alvi
Mr. Abu Bakr Alvi, Senior Journalist Based in Faisalabad

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