5 Historic Times when the Currency Collapsed in Pakistan

Currency value acts as a thermometer for a country’s economic health. When a nation faces fiscal mismanagement, political unrest, trade deficits, or external debt, its currency can weaken rapidly. This affects imports, inflation, and the livelihoods of citizens. 

In Pakistan, the rupee has weathered multiple storms, some gradual, others abrupt. Here’s a look at five historic currency collapses in Pakistan, how they happened, and what they signified for the nation’s economy and future.

1. First Major Devaluation – 1972

Following the secession of East Pakistan (now Bangladesh) and the aftermath of the 1971 war with India, Pakistan devalued its currency to stabilize foreign exchange reserves and appease international donors.

• Year of Collapse: 1972
  
• Value From: PKR 4.76 = 1 USD
  
• Value To: PKR 11.00 = 1 USD
  

Reason for Collapse:

• Loss of economic strength post-1971 war
  
• Weak exports and shrinking foreign reserves
  
• Pressure from the IMF and World Bank to adjust the exchange rate
  

2. Nuclear Sanctions and Economic Crisis – 1998

In May 1998, Pakistan conducted nuclear tests and faced immediate global sanctions, freezing aid and foreign exchange inflows. The rupee rapidly depreciated amid economic isolation.

• Year of Collapse: 1998
  
• Value From: PKR 46.00 = 1 USD
  
• Value To: PKR 61.00 = 1 USD
  

Reason for Collapse:

• International sanctions post-nuclear tests
  
• Suspension of IMF and World Bank programs
  
• Freezing of foreign currency accounts triggering panic withdrawals
  

3. Balance of Payments Crisis – 2008

During the global financial crisis, Pakistan faced a sharp drop in reserves, rising oil prices, and political instability. The rupee plunged as inflation and fiscal deficits soared.

• Year of Collapse: 2008
  
• Value From: PKR 62.00 = 1 USD
  
• Value To: PKR 82.00 = 1 USD
  

Reason for Collapse:

• High oil import bills
  
• Global recession and declining remittances
  
• Political transition and uncertainty
  

4. Currency Crash Amid Twin Deficits – 2018

A severe trade deficit and falling reserves led to a steep devaluation of the rupee in 2018. Pakistan approached the IMF for a bailout, triggering further market volatility.

• Year of Collapse: 2018
  
• Value From: PKR 105.00 = 1 USD
  
• Value To: PKR 138.00 = 1 USD
  

Reason for Collapse:

• Widening current account deficit
  
• Depleting forex reserves
  
• Speculation and market uncertainty over IMF negotiations
  

5. Record Low During Political and Economic Crisis – 2023

In early 2023, amid political instability, IMF delays, and dangerously low reserves, the rupee fell to historic lows, triggering import restrictions and mass inflation.

• Year of Collapse: 2023
  
• Value From: PKR 178.00 = 1 USD (early 2022)
  
• Value To: PKR 285.00 = 1 USD (mid-2023)
  

Reason for Collapse:

• Political deadlock and delayed IMF deal
  
• Soaring inflation and external debt repayments
  
• Collapse in investor and public confidence
  

While some devaluations were inevitable for economic correction, others came abruptly and painfully due to poor planning. Currency collapses don’t just affect trade or banks, they shake every household, increase inflation, and deepen poverty. A stable rupee requires fiscal discipline, strong institutions, and sustained investor trust, lessons that remain more relevant today than ever before.