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The Pakistani rupee’s value against the U.S. dollar dropped to a record low in the interbank market on Thursday, with data from the State Bank of Pakistan (SBP) showing the national currency closed at Rs. 255.43 to the dollar compared to Rs. 230.89 a day earlier, a depreciation of 9.61 percent.
The massive drop has been attributed to the removal of an unofficial price cap on the interbank, despite both the government and the central bank repeatedly claiming the rupee’s value was not being managed in any way. Alongside the interbank rate, the rupee’s value in the open market also declined, trading at Rs. 255 on Thursday against Rs. 243 a day earlier, or a depreciation of 4.94 percent.
The previously widening gap between the open market and interbank rates has now been bridged, with economists saying this should prove a boon for exports and remittances and pave the way for the end of a ‘grey market’ that had arisen due to the artificially managed exchange rate. However, they have warned that further fluctuation would likely be witnessed in the coming days until the market normalizes.
Market observers also hope the decision to life the rate cap will facilitate the revival of the stalled IMF program, triggering further inflows to shore up the country’s declining foreign exchange reserves.