Pakistan Rupee crashes to 20-year low amid economic crisis

Representative image (Reuters)

Pakistani rupee witnessed its biggest one-day decline in over two decades on January 27 after the government relaxed its grip on the currency to secure loans from the International Monetary Fund.

Pakistan’s money exchange companies removed the limit on the dollar-rupee rate effective January 25 onwards and said they will let the local currency drop slowly in the open market.

At 14:05 IST, the Pakistani unit was trading at Rs 259.7 compared to the previous close, and a record low, of Rs 255.43 in the interbank market.

Moreover, the central bank this week raised interest rates to a 24-year high to fight the highest inflation in decades. Pakistan secured a $6.5 billion IMF bailout in 2019, but the release of funds has reportedly been stalled.

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The move towards a market-based exchange rate could cause 'artificial' distortions for an economy in desperate need of financing, say analysts.

The Exchange Companies Association of Pakistan has informed the central bank of its decision to remove the limit, President Malik Bostan said in a phone. The group had earlier voluntarily decided to cap the dollar-rupee rate to help ease pressure on the currency.