With Removal Of Currency Cap By Market Maker Group, PKR Plummets Against USD

In the Wednesday trading session, the value of the Pakistani rupee (PKR) recorded a major fall against the US dollar (USD).

This happened as the currency cap was removed by the foreign exchange companies from the Pakistani rupee.

It was revealed that the price cap resulted in the distortions of the rupee, which is considered mainly artificial. It was causing many problems for the economy while the country was in desperate need of IMF help.

IMF Should be pleased

It is important to mention that the price cap had been put into effect for a while by the current Finance Minister of Pakistan, Ishaq Dar.

According to the sources, the cap had been put in place to defend the value of the PKR against the USD. However, it had been causing a major negative impact on the country’s economy.

It was just a failed attempt made by the current Finance Minister of Pakistan to save his position as the decision-maker. He had promised that he would bring the value of the dollar below the PKR 200 mark in his tenure.

Turns out, he attempted to do it in an artificial manner, and even with distortion, and with market intervention, nothing much could be done.

The value of the dollar kept on rising against the rupee in the international market. This caused many problems for the Pakistanis living in the country and internationally.

The businesses in Pakistan were not able to send dollars outside of the country due to price mismatches. The banks demanded prices even higher than the international price of the dollar against the rupee.

On the other hand, the International Monetary Fund (IMF) was constantly pressuring the Pakistani Finance Ministry to take the right actions.

They demanded that Pakistan must remove the price cap and apparently, Ishaq Dar was not willing to do it.

Therefore, the IMF made it crystal clear they will not proceed with their program with Pakistan until their demands were fulfilled.

With no option in sight, Ishaq Dar had to get the price cap removed, which is to please the IMF. It is expected that it would regain some of the trust Pakistan’s Finance Ministry has lost in front of the IMF.

With the price cap out of the way, the dollar has shot up tremendously against the Pakistani rupee. Pakistan expects that with one major obstacle out of the way, the IMF will continue with its stalled bail-out program.

Highest Inflation Rates in Pakistan

At present, Pakistan’s economic condition is extremely unwell. The inflation rates are at an all-time high and they are the highest in several decades.

To counter the rising inflation rates, the central bank is constantly resorting to increasing the interest rates. However, the country only has fumes in its treasury and reserves, which is an alarming situation.

According to the State Bank of Pakistan, the money in the reserves is enough only to cover up to 3 weeks of imports. The country already has very high financing obligations with the outer world.

The country is in a complete state of conflict where the Federal Government’s focus is to collect as much aid as possible. They do not have a vision or a plan to get the country out of trouble.

According to senior analysts and economists, the only way to bring the country out of the troubling times is to hold elections.

However, the Federal Government is trying to avoid that situation as it knows it has no vote bank. The government is using its power and influence to arrest the leaders of their opposition.

At present, Pakistan Tehreek-e-Insaaf (PTI) is the strongest party in the country, and it is also sitting as the opposition. Instead of having a fair election with PTI, PDM, the ruling party is arresting its top leadership.

They want to avoid the elections and continue pushing the country into more economic and financial chaos.

Performance of the Rupee against the Dollar

The latest trading session saw the trading price of the Pakistani rupee fall to 240.60 rupees against a single dollar.

The Pakistani rupee even traded at 243 in the early opening hours of the forex market. There are speculations that the value of the rupee may fall to over 250 rupees against a single dollar in near future.