Pakistan’s Rupee Depreciation and Its Struggle with Decreasing Dollar Inflows

pakistan's rupee depreciation and its struggle with decreasing dollar inflows

pakistan’s rupee depreciation and its struggle with decreasing dollar inflows

The Pakistani rupee has been losing value against the US dollar for the second month in a row due to a decrease in the inflow of US dollars. This means that Pakistan received fewer loans in US dollars during September 2023.

In July 2023, Pakistan received $2.89 billion, but when you add the $1.1 billion loan from the International Monetary Fund (IMF) under the $3 billion Standby Arrangement (SBA), the total amount goes up to $4 billion. In August and September, Pakistan’s ability to generate dollar loans decreased. with loan disbursements of $316 million and $320 million, respectively.

Earlier, the government, with input from intelligence and law enforcement agencies, had taken measures against money changers and speculators to improve the exchange rate between the rupee and the dollar. These measures were successful to some extent but they had their limits.

The economic authorities failed to take actions to ensure a continuous flow of dollars into the country. which led to the recent decline of the rupee against the dollar.

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In the first quarter of the  year (July-September), Pakistan received $3.52 billion in loans from various international and bilateral creditors.  which is more than the $2.234 billion received in the same period in the previous year.

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Pakistan has requested $17.6 billion in foreign loans for the entire fiscal year. To meet this target and maintain healthy foreign exchange reserves, the country needs to secure $14.1 billion in the remaining three quarters of the year. If this doesn’t happen, it could lead to a balance-of-payment crisis.

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