Pakistani’s rupee has recovered some poise after a shock plunge against the dollar that has escalated tensions between the government and central bank.
The rupee nosedived more than 3 per cent on Tuesday to its lowest since at least 1989 – marking its first significant move in over two years.
The central bank had been keeping the currency stable against the dollar for over three years with the surprise plunge immediately raising questions about the State Bank of Pakistan allowing the depreciation to help support the economy.
Having weakened from Rs104.8 against the dollar to Rs108, the rupee is now trading around Rs105.8 but has still not managed to wipe out the week’s losses.
Pakistan’s finance minister has since hit out at the central bank, accusing it of “exploiting” the country’s political troubles where prime minister Nawaz Sharif has been implicated in a corruption scandal over the Panama Papers.
Ishaq Dar, finance minister, called the move in the currency “artificial”, and said he had “deep concern and indignation” at the central bank’s tactics. He has ordered a government investigation into the FX move.
Pakistan has suffered from a drop in exports in recent years, as well as declining remittances from Pakistanis living overseas. Economists note that a weaker currency should help reverse both trends while also allowing the central bank to preserve its dwindling foreign currency reserves.
The benchmark Karachi 100 stock exchange is up 1 per cent today after suffering a 4 per cent plunge on Tuesday.
Chart via Bloomberg