On the first day of the interim government’s assumption of power, the Pakistani currency experienced a significant decline, closing at a three-month low of Rs292 against the US dollar. The local currency dropped by Rs3 against the greenback in the interbank market around midday, in line with market expectations of a fresh round of depreciation.
For the past three months, the Pakistani rupee had maintained stability, hovering around Rs288 against the US dollar. However, the market had been rife with speculation that the currency was poised for depreciation following the acquisition of a $3 billion loan program from the International Monetary Fund (IMF) in late June 2023.
Interestingly, the previous government elected not to implement the depreciation during its final two months in office, likely as a strategic move to preserve political capital. This decision ultimately fell to the caretaker government.
Market analysts are suggesting that the recent depreciation was largely influenced by the government’s choice to eliminate all restrictions on imports, which were previously enforced to manage the nation’s diminishing foreign exchange reserves.
The interim government, which has taken over the reins of power at a crucial economic juncture, will now face the challenge of stabilizing the currency and addressing the broader economic concerns in the face of both domestic and international pressures. As the nation navigates these complex economic dynamics, experts will closely monitor the government’s policies and actions to assess their impact on the Pakistani economy and the value of its currency in the global market.
