Aamir Qureshi—AFP
The Pakistani rupee hit an all-time low against the U.S. dollar on Tuesday, selling at Rs. 224 in both the interbank and open markets.
This is the second massive drop in the local currency in just two days. A day earlier, the rupee had dropped by Rs. 4.25, or 1.97 percent, going from Rs. 210.95 to Rs. 215.25. Today’s drop has added a further gap of Rs. 8.8, according to data from foreign exchange dealers.
This is the highest single-day depreciation since March 26, 2020, when the rupee had dropped by Rs. 5.9 at the interbank market, going from Rs. 162 to Rs. 167.5.
The volatility of the national currency has been linked to the opposition Pakistan Tehreek-e-Insaf’s landslide win—15 of 20 seats—against the ruling Pakistan Muslim League (Nawaz) in the Punjab by-elections, which has triggered political uncertainty over concerns that the incumbent government could proceed toward early elections and leave the country under a caretaker setup that would be unable to take “tough decisions” to ensure macroeconomic stability. The PMLN has yet to issue any formal statement on its intent—with ministers claiming any decisions will be taken after consultation with all allied parties—exacerbating the uncertainty over the country’s future.
Additionally, per analysts, the country is also experiencing greater pressure from imports, which is worsening the value Pakistani rupee, as Islamabad lacks the funds necessary to ensure payments of imports for more than 6 weeks. The latest tranche of an International Monetary Fund (IMF) bailout has yet to be released, with estimates that it would not happen until mid-August at the earliest, worsening the country’s situation.
A third factor is also the strengthening of the U.S. dollar against all global currencies, which analysts say is being disproportionately reflected in the local currency. Analysts have warned that the situation is unlikely to improve so long as the prevailing sentiments continue, adding that a key requirement remained resumption of the IMF program.