The Pakistani Rupee (PKR)
The history of the Pakistani rupee can be traced back to the
Indian rupee, which was introduced by the British Raj in 1835. After
Pakistan's independence in 1947, it continued to use the Indian rupee until 1951
when the first Pakistani rupee was introduced. Over the years, the value of the
Pakistani rupee has fluctuated significantly, influenced by various economic
and political factors, and it is currently one of the weaker currency in the
world.
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| The Pakistani Rupee (PKR) |
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State Bank of Pakistan has introduced coins and banknotes to
improve the functionality and security of the currency. A 5-rupee coin was
introduced in 2015 and a 10-rupee coin in 2016. The banknotes in circulation
today range from the 10-rupee note to the 5,000-rupee note, with the 50th
anniversary Rs 5 banknote being a commemorative note issued on a special
occasion. The
green banknote was released by the State Bank of Pakistan to mark Pakistan's 75th
anniversary of independence. It has photographs of four national heroes on the
front and was signed by the newly appointed SBP Governor, Jameel Ahmed.
Initially, the
Pakistani rupee was pegged to the British pound after gaining independence from
Britain in 1947. However, the Pakistani government adopted a managed float
policy in 1982, which allowed the value of the currency to be determined by
market forces, but with central bank interventions to keep the currency in a
specific price range.
However, this policy led to financial instability and the value of the Pakistani rupee fell
significantly against major currencies, including the British pound. The fall
in the value of the currency made imports more expensive, leading to inflation
and further economic instability.
The currency continued to remain under pressure until the turn of the century when the State Bank of Pakistan took measures such as lowering interest rates and purchasing the U.S. dollars to curb the falling value of the currency. These measures helped to stabilize the currency, but the Pakistani rupee remains vulnerable to fluctuations in global financial markets and other economic and political factors.
Pakistan’s Economic Prospects
Like many
other emerging market currencies, was severely impacted by the global financial
crisis in 2008, losing more than 20% of its value against the U.S. dollar.
Since then, the currency has continued to depreciate against the dollar, due in
part to the country's large current account deficit.
The Pakistani
rupee is not strongly correlated with other currencies, financials, or
commodities, partly due to the volatility and fragility of the country's
economy. However, Pakistan's economy has shown signs of improvement in recent
years, with increasing economic ties with China and other countries in the
region.
The
China-Pakistan Economic Corridor (CPEC) is a significant project that is
expected to provide a major boost to Pakistan's economy. The CPEC is a part of
China's One Belt One Road (OBOR) initiative, which is a massive infrastructure
development program aimed at creating a network of trade routes connecting
Asia, Europe, and Africa.
The CPEC is a 1,864-mile (3,000-kilometer) network of roads, railways, and oil and gas pipelines that will connect the western Chinese province of Xinjiang to the Pakistani port of
Gwadar is located in the Arabian Sea. The project is expected to provide a major
boost to Pakistan's economy, with estimates suggesting that it could add 2
percentage points to the country's annual GDP growth rate.
The project is expected to create jobs, stimulate economic activity, and improve infrastructure in Pakistan, particularly in the areas of energy, transportation, and
telecommunications. In addition, the CPEC is expected to strengthen ties
between China and Pakistan, potentially leading to increased investment and
trade between the two countries.
IMF to the Rescue
Pakistan has
been facing significant economic challenges in recent years, and the country
has been relying on financial assistance from the International Monetary Fund
(IMF) to stabilize its economy.
The
Pakistani government Began negotiations with IMF on February 1, 2023, to
discuss the plan to rescue the economy including the installment of $ 1.1
billion.
In 2019,
Pakistan secured a $6. Billion bailout program from the IMF, which was
conditional on the implementation of structural reforms to address macroeconomic
imbalances. However, the most recent tranche of the bailout program stalled in
November 2022 due to differences over a program review.
Pakistan's
foreign exchange reserves have fallen to an all-time low, and the country is
facing mounting debts and urgent infrastructure needs. The government has
indicated its readiness to resume negotiations with the IMF and meet the
stringent conditions imposed by the lender, including a market-based exchange
rate, increased energy pricing, an increase in the bank interest rate, and the
imposition of new taxes.
A successful revival of the bailout program could potentially lend support to the Pakistani rupee and provide some stability to the country's economy. However, the implementation of the necessary reforms will be challenging, and there are likely to be significant social and political costs associated with some of the IMF's demands. Financestudypool.com will assist you in making any financial decision.