Historical USD to PKR Rates 1960-2020

The historical movement of U.S. dollar against the Pakistani Rupee has been a fluctuating yet continuously rising flight. Historically pegged to British Pound before 1980s, the Pakistani Rupee has seen a stable era during 1960s and 1970s, as the currency was under ‘fixed exchange rate regime’. However, in 1982, Zia-ul-Haq under his regime shifted to ‘Managed Float Regime’ where State Bank of Pakistan could intervene in value of Pakistani Rupee against other currencies and U.S. dollar was the main determinant of value of rupee.

The chart below displays the historical USD to PKR rates from 1960 to 2020.

The chart shows a stable Rupee value against dollar till 1980s after which under the managed exchange regime was followed and Pakistani rupee started fluctuating against the dollar. The PKR on back of slowed economic growth during 1990s devalued from Rs. 20 in 1990 to Rs. 55 in 2000. However, after 2000, under Musharraf regime, Pakistan saw an era of privatization, better governance and increased exports which led to current account surplus on State Bank’s books and thus, Pakistani rupee remained stable from Rs. 62 in 2001 to Rs. 60 in 2007.

From 2007 to 2013, the huge current account deficits and terrorism in the country led to worsening economic conditions and thus, Pakistan rupee depreciated from Rs. 60 in 2007 to Rs. 101 in 2013. This rate was further kept artificially down by PMLN government despite lower exports and large current account deficits. During last year, the government has adopted a free float regime under IMF programme while reducing subsidies on imports. This led to current spike in Pakistan rupee against dollar from Rs. 121.48 in 2018 to around Rs.158 in March 2020.

Some of the factors contributing to unstable value of Pakistani rupee against dollar value include the following.

Subsidizing Imports

The Pakistani currency has remained an overvalued one specifically during PMLN tenure from 2013-2018 as Ex-Finance Minister Ishaq Dar kept Pakistani Rupee stable between values of Rs.101 and Rs.105. The government under PMLN kept interfering with import subsidies to keep dollar cheaper in the country with large supply.

While it is normal for governments to interfere with the currency valuations through subsidizing imports, the continuous subsidies provided on imports in Pakistan had kept Rupee at overvalued rate with no strong export base. Instead of subsidizing the strategic imports, all imports benefited from this regime. This resulted in spikes in dollar value against Pakistani rupee when PTI-led government decided to adopt free-float exchange regime under the IMF programme.  However, a positive side of this can be deduced from the fact that government has now decided to provide import subsidy on strategic imports for instance, industrial use raw material which can benefit the local manufacturing industry.

Currency devaluations are beneficial for economies with large industries and substantial export bases. However, when government recently adopted a free-float programme to let go of artificially held rupee valuation, it did very less to support exports of Pakistan as the industry is already facing a stagnant phase since past many years. Therefore, rising USD value against Pakistani rupee only increased pressure on our economy in terms of rising policy rate and discount rate, increased inflation and slowed GDP growth.

As value of US dollar strengthen against rupee, the cost of borrowing also increased substantially and with around $105 billion external debt on our head, the current USD to PKR rate is giving a major setback to our economy.

Currently, the Pakistani Rupee had found a stable level round Rs. 155 against US dollar which could be termed as real value of Pakistani rupee against dollar. However, the recent crisis of Coronavirus has sent shocks to global economies around the globe and with Pakistani rupee again surging to Rs.166 against USD, we have to wait for a new level of valuation for our local currency.