On April 25, 2024, the exchange rate of the US Dollar to Pakistani Rupee (USD to PKR) stood at Rs. 278.38 at the commencement of trading in the interbank market. By the close of trading on Wednesday, the Pakistani Rupee experienced a slight decline of 5 paisas. Nonetheless, over the past few months, the domestic currency has maintained a generally stable position.
The volatility of the PKR against the USD has its deeper root in a multifaceted integration of economics, politics and external variables. Recurring international crises of this kind call for drastic policy decisions which cut down on domestic the ability to react to the shocks and lessening of the burden on external borrowing, while concentrating the national economy on export and supporting political stability. Uniquely, Pakistan needs a mustered effort as the sole way of taming volatilities of its currency and attain sustainable stability.
Currency dynamics is a broad area of study and, in this, it becomes visible that Pakistani Rupee (PKR) has been having difficulties in stabilizing against the US Dollar (USD). Regardless of the view, many factors underlie this area, but a few of them are worth looking into.
Economic Vulnerabilities: Pakistan’s economy, unfortunately, is faced with the multiple of vulnerabilities like trade gap, low foreign exchange earnings, and high levels of debt. These factors can release very sound pressure at the currency that make its value to be volatile and this may make it to devaluate against strong currencies like the USD.
External Debt Burden: The situation of PKR wasted on overseas borrowing for development projects and interest payments is one of the reasons Pakistan’s currency struggles, and they deepen the exchange rate crisis. Currency fluctuations in global environment can put more pressure on a non-USD currency, along with changes in interest rates and investors’ emotions that can end up to devaluation against the USD.
Trade Imbalance: Consistent imbalances between imports and exports, occasioned by persistent trade deficits, undermine the value of PKR even if major currencies maintain their steady march. The currency is hit hard as the country relies too much on imports and comes with a weak export base, causing the imbalance to grow to a larger extent thus the currency is under pressure.
Political Uncertainty: Political instability and unpredictability can evoke fears among investors that might translate into a weaker currencies’ value. Political events, policy shifts, and governance issues can result in a plan that gives uncertainties, prompting investors to seek safer havens like the USD, which depreciates the PKR.