Fall of the Rupee: The Pakistani currency reached a new all-time low in the year 2022.
“Daronomics” only resulted in temporary gains versus the greenback, and the rupee continued to perform poorly relative to other currencies.
ISLAMABAD: As the bells for another new year ring, the damaged economy of the nation will stutter into 2023 with an embarrassing track record of the rupee’s decline against the US dollar.
The overall value of the Pakistani rupee declined by Rs48.38 versus the US dollar in 2022 as a result of the government’s struggles with expensive import payments, diminishing foreign exchange reserves, and unrest in the political system.
The government tried to maintain a steady hand on the economy’s wheel and even went so far as to replace its economic czar — changing its horses in the middle of the race to halt the oncoming crisis of default — but the currency nevertheless saw repeated historic lows.
In addition, despite the severe challenges to its economy, Afghanistan’s currency appeared to be performing pretty well at one point. The Pakistani rupee, meanwhile, was one of the worst-performing currencies on the international market.
Here’s an overview:
On December 1, early trading in the interbank market saw the Pakistani rupee return to its falling fate against the US dollar following a modest improvement the previous day.
The spot rate of the rupee dropped to a low of Rs224, shedding 31 paisas, after remaining stable for a week with just a slight recovery.
In stark contrast, the value of the rupee in the interbank market at the beginning of the year, in January, was Rs176.75.
The rupee experienced lacklustre trading during the session, with an intraday high bid and low offer of 176.75 and 176.65, respectively. The rupee was trading at 177.50/178.50 per dollar on the open market.
The dollar was worth Rs176.42 in February, while on March 1 it was worth Rs177.41.
The value of the rupee continued to decline in April as the value of the dollar increased, reaching Rs184.9.
The Pakistani rupee maintained its unceasing drop into May, when it further declined and settled at Rs186.62.
The dollar increased by Rs11 to end the month of June at Rs196.86, breaking records with each high.
According to information provided by the Forex Association of Pakistan, the rupee traded as high as 250 to the dollar in July, reaching an all-time low on the open market (FAP).
The local currency did, however, make modest gains in the interbank market after nearly two weeks of uninterrupted sessions of fall.
The rupee increased by Rs0.57, or 0.24 percent, to close at 239.37 in the interbank market, according to the State Bank of Pakistan.
The US dollar index relative to a basket of other currencies is a crucial indicator of the strength of the US currency. The index has increased 18% over the past few months, but the rupee has declined by 21% more, or 37%, when compared to the US dollar.
The rupee had lost 42% in value in a year as of August 1 compared to a 14% increase in the US dollar index, a 28% difference.
‘Daronomics’
The financial crisis reached a breaking point in September when the government chose to replace Miftah Ismail as the nation’s financial watchdog with Ishaq Dar, who had been living in self-imposed exile in London for five years. Dar was playing what many analysts refer to as “Daronomics” at the time.
Hours before the arrival of the PML-N leader in the nation who was expected to become Pakistan’s new finance minister, the rupee made enormous gains right away, surging by 1.11% versus the US dollar in the interbank market.
The rupee continued to gain ground on the dollar. In October, it increased by Rs1.65 to close at Rs225.63 in interbank trading against the US dollar.
Since Ishaq Dar assumed control of the finance ministry, the rupee has been steady versus the dollar for eight straight sessions.
The dollar’s value again dipped marginally in November and ended up at Rs220.64.
The trend turned out to be fleeting, though.
After a gap of two and a half months, the value of Pakistani rupee declined beyond 225 versus the US dollar this month (December) due to a widening imbalance between demand and supply of the greenback.
People were prompted by the downward trend to invest their money in gold in an effort to lessen the effects of the rupee’s depreciation at a time when inflation was high.
