MM News

The Pakistani Rupee (PKR) is facing constant depreciation against the United States Dollar (USD) amid a severe economic crisis that has placed the nation on the drink of default.

It is of utmost interest to know the history of the relationship of PKR and USD since independence. It is assumed that 1 USD to PKR in 1947 was equal but the claim has been debunked as the rupee was pegged to the British Pound Sterling.

In 1971, Prime Minister Zulfikar Ali Bhutto took the drastic step of nationalizing all major banks in the country, in an effort to increase government control over the economy. This led to a sharp decrease in the value of the Pakistani rupee, and it was not until 1978 that the currency began to recover.

In 1947, Pakistani government did not adapt US dollar. In early 1970, US economy dominated the whole world. On 17th September 1971, Pakistani government adapted US dollar as the foreign exchange currency.

The first elevation period came when President Zia-ul-Haq shifted the currency to a managed float and the USD against PKR suddenly elevated to peaks. The PKR consequently lost the value by 38.5% and the cost of import suddenly rose. The State Bank stabilized maintained the current account surplus to push up the value of PKR against USD.

The second elevation period has occurred since 1982. In 2008, PKR lost 23% of value against USD and fall to almost Rs79.2 per USD. The uncertain political conditions and lack of security depleted the foreign investment and foreign exchange reserves fell disastrously.

The third elevation is occurring now as the local currency dropped to its lowest level. The rate of dollar in Pakistani market has been continually rising for the last two decades.

There has been a gradual but substantial increase in dollar rate since 2000. Multiple factors such as global war on terrorism, political instability and decreasing imports caused the rate of dollar to go further up.

In mid 2000s, it was at around PKR 60. In 2012, the US dollar reached its record high price as it crossed the mark of PKR 100. The lowest point came when the dollar was traded 295.65 PKR on 12 May 2023.

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