In 2023, the Pakistani Currency value has fluctuated wildly, falling precipitously versus other major currencies. The shocking loss of 475 billion rupees in just five months from July to December provides cause for concern regarding the state of the country’s economy. However, why is the value of the Pakistani rupee falling at such a rapid rate, and how will regular Pakistanis feel about it?
Economic Downturn Meteor
This perfect storm has hit the rupee because of a number of things:
- War in Ukraine and other supply chain interruptions have driven up the price of commodities around the world, especially food and oil.
- As a result, Pakistan’s trade imbalance has widened and the country’s demand for foreign currency to cover imports has increased, as it is a net importer of both.
- The recent political upheaval in Pakistan, which included the resignation of Prime Minister Imran Khan and the establishment of a new coalition administration, has cast doubt on the future of the country and its currency, the rupee.
- A decline in Pakistan’s foreign exchange reserves over the past few months has made it harder for the country’s central bank to step in and prop up the rupee.
- The rupee’s decline in value has contributed to rising prices across the board, making life more difficult for average Pakistanis.
What Happens to Regular People
The depreciation of the rupee has far-reaching effects on the people of Pakistan:
- With inflation currently at almost 25% and the rupee’s decline, it’s just going to get worse. Food, fuel, and medicine, which are necessities for every home, will become more expensive as a result.
- Layoffs and reduced output could add to the unemployment rate as companies try to cope with growing costs.
- Foreign investment may be dampened by the economic uncertainty caused by the rupee’s depreciation. Which in turn slows down economic growth and development.
What Lies Beyond
Interest rate hikes and foreign lender aid are two measures adopted by the Pakistani government to counteract the rupee’s decline in value. Nevertheless, it can be a while before these steps provide results. While this is happening, Pakistanis should prepare themselves for much more economic suffering.
This is a complicated topic, and this blog post has just touched on the surface. It will be a lengthy and difficult road to recovery because there are many more components involved. But we can face the future with confidence and hope for Pakistan’s Currency stability and prosperity. If we know what’s causing the rupee to fall in value.