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Around 1 pm on Thursday, the Pakistani rupee plunged by Rs24.11 (or 9.45%), reaching an all-time low of Rs255 against the US dollar in the interbank market.
In accordance with an International Monetary Fund (IMF) requirement, the government no longer controls the rupee-to-dollar exchange rate, which has led to the most recent decline.
According to the State Bank of Pakistan, the local currency had reached a day earlier a closing rate of Rs230.89 versus the US dollar (SBP). The Pakistan Stock Exchange (PSX), however, rose by 1,200 points during the day thanks to the depreciation of the currency.
Prior to the start of the IMF's $7 billion loan package, financial experts predicted that the native currency could depreciate to Rs250–260 versus the US dollar.
The Fund had already requested that the government allow market forces, primarily commercial banks, to determine the exchange rate. This was one of four key requirements to restart the IMF programme that had stopped.
Since Ishaq Dar became the finance minister in late September 2022, the rupee has stayed in government hands. Dar had previously stated that the fair value of the rupee is between Rs180 and 200 per USD.
The finance minister also thought that market forces had twice artificially devalued the rupee to Rs240/USD in 2022—once in July and again in September.
As a result, the central bank investigated banks and found 13 institutions to be at fault. The SBP announced earlier this month that it would take action against the banks soon.
In the meantime, Pakistan gave the United States assurances on Wednesday that it was still committed to the IMF programme even though its reserves had shrunk to barely enough to cover a month's worth of imports following another $500 million in debt repayment.
Pakistan has been asked by the IMF to create a market-based currency rate, remove import restrictions, raise taxes, and raise electricity rates. However, the administration has not yet implemented any of these steps and is holding off until there has been a formal interaction with the international lender.
Pakistan paid a Chinese commercial bank $500 million, which has since caused the reserves to decline to a level that is by no means comfortable.
