Pakistan’s current stock of external loans has escalated by Rs. 3,500 billion as the Rupee (PKR) has steeply declined against the US Dollar (USD), as per official estimates.
The rupee depreciated against the dollar by Rs. 35 (17 percent) in July 2022, which was the highest decrease in any month in the country’s history, going down from Rs. 204 to Rs. 239 during the period in review.
The declining trend in the value of the local currency is expected to increase inflation in the coming days. Market sentiments suggest that the prices of imported products, including petroleum, wheat, cotton, and food items, will increase at the same rate. Furthermore, inflation is currently at the highest level of 37 percent year-on-year (YoY), according to data released by the Pakistan Bureau of Statistics (PBS).
According to an initial estimate by the government, July’s rupee downfall added another Rs. 3,500 billion to the total stock of the government’s external loans. The Ministry of Finance revealed that the federal government’s total volume of external loans, excluding liabilities, reached $100 billion by March 2022.
Speaking at a presser on Sunday, the Minister for Finance, Miftah Ismail, said that the PKR is under pressure owing to a variety of factors, including speculations and the high import bill for June 2022. He informed journalists that the situation would improve in a matter of weeks.
The drastic decrease in the local unit’s value against the USD has created a negative impact, which is affecting businesses and economic activities in the South Asian country. Additionally, the present uncertainty in currency trends is substantially affecting the country’s economy.
An economic expert said that the International Monetary Fund (IMF) program is the only way to exit this crisis. The PKR may strengthen against the USD after the meeting of the IMF Board, which is expected in the last week of August, Minister Ismail said.