Pakistan’s rupee has experienced a significant gain of 6.1% against the US dollar in September. This increase comes as a result of a crackdown on illegal foreign exchange trade in black and gray markets by security agencies. The rupee had hit a record low of 307.1 against the dollar on September 5 but has since made a strong recovery. As a result of the clampdown on black market operators, tens of millions of dollars have poured back into Pakistan’s interbank and open markets.
Despite its recent performance, the rupee has been one of the worst-performing currencies in recent years. Its current gains should be viewed as a recovery rather than a true out-performance. The stability in the exchange rate is expected to relieve the pressure of imported inflation and ease commodity prices. However, with Pakistan’s reserves standing at just $7.637 billion, enough for less than two months’ worth of imports, the situation is still far from comfortable.
It is crucial for Pakistan to maintain a market-determined exchange rate to secure a $3 billion bailout loan from the International Monetary Fund (IMF). Although the recent performance of the rupee is encouraging, inflation is anticipated to remain high in the coming months due to upward adjustments in energy tariffs and significant increases in fuel prices.