In an unexpected turn of events, the Pakistani Rupee (PKR) experienced a downward shift against the US dollar on Thursday. This decline, characterized by a 14 paisas drop, led to a closing exchange rate of PKR 287.60 against the dollar in the interbank foreign exchange market, as opposed to the previous day’s rate of Rs 287.46. The sudden turmoil in the exchange rate was attributed to the dissolution of the National Assembly, which triggered an uncertain interim period.
Currency experts pointed to the unexpected dissolution of the legislative assembly of Pakistan as the primary catalyst for the observed exchange rate volatility. President Dr. Arif Alvi’s approval of the prime minister’s recommendation to dissolve the assembly disrupted the scheduled tenure completion. This abrupt political change left a void of uncertainty, which significantly impacted the stability of the Pakistani Rupee against foreign currencies, particularly the US dollar.
Adding to the turbulence was the recent decision by the State Bank of Pakistan (SBP) to authorize commercial banks to initiate import payments through the opening of letters of credit. This policy shift exerted further pressure on the local currency. Coupled with this change, the dwindling foreign exchange reserves exacerbated the situation. As of July 27, 2023, Pakistan’s foreign exchange reserves had dwindled to $13.464 billion, reflecting a $70 million decrease from the previous week.
Given the volatility in the exchange rate, market participants, investors, and traders are being advised to exercise caution and remain well-informed about foreign exchange rates. The substantial impact of currency fluctuations on trade, investments, and the broader economy underscores the significance of making informed decisions in this fluid environment.
The performance of the PKR against the US dollar and other key currencies in the coming days will be influenced by the combined efforts of the government to bolster foreign exchange reserves and global economic factors. Maintaining stability in the rupee’s value holds critical importance for both domestic and international stakeholders. The evolving political landscape and economic policies will continue to shape the direction of the exchange rate
The unexpected dissolution of the National Assembly has sent ripples through Pakistan’s economic landscape, resulting in a decline in the value of the Pakistani Rupee against the US dollar. The concurrent policy changes by the State Bank of Pakistan and diminishing foreign exchange reserves have further intensified the challenges.