Implications of Rupee Depreciation on Inflationary Pressures
The Pakistani rupee is on the brink of a major downfall, with experts predicting a potential plunge to as low as Rs350 against the US dollar. This alarming projection has sent shockwaves through the nation, as the weakening currency is expected to have far-reaching implications, particularly in terms of inflationary pressures that will disproportionately burden the lower and middle classes.
According to reports, the rupee has already lost approximately 20 percent of its value this year, positioning it among the worst-performing currencies worldwide. The sharp devaluation has sparked concerns among stakeholders.
Political Unrest and IMF Aid Delay Fuel Rupee’s Decline
One of the key factors contributing to the rupee’s decline is the growing apprehension that the International Monetary Fund (IMF) may not provide the much-needed bailout required to prevent a fiscal default in the upcoming fiscal year. Capital flight from Pakistan has intensified due to this uncertainty, adding further pressure on the rupee’s value.
The delay in receiving aid, which has been stalled since November, is suspected to be linked to the political unrest in the country. Ever since the removal of Imran Khan, Chairman of Pakistan Tehreek-e-Insaf (PTI), through a no-confidence motion vote in April last year, the country’s leadership has been plagued by instability. Khan’s recent arrest has only heightened tensions, leading to fluctuations in the rupee’s value.
Multiple experts are now warning of an imminent massive drop in the rupee, with some analysts even foreseeing a further 20 percent depreciation. The currency’s future trajectory heavily depends on the ongoing clashes between Khan and the government, as well as the IMF’s decision regarding financial assistance.