<p>Pakistan is in dire straits due to its collapsing economy. In order to receive financial aid from the IMF, the cap on exchange rate has been removed. As a result, the Pakistani rupee has plummeted to a record low of Rs 255.43 against the dollar in the interbank market on Thursday, sliding Rs 24.54 or 9.61 per cent from Wednesday’s close.</p>.<p>Pakistan agreed to relax its control on exchange rate as it was one of the demands of the IMF to bailout funds to the crisis-hit Asian country. </p>.<p>The IMF pressed for a capping exchange rate as it created black market for dollars and discouraged foreign inflow through regular channels. </p>.<p><a href="https://www.deccanherald.com/business/business-news/pakistani-rupee-plunges-to-all-time-low-against-us-dollar-1184867.html" target="_blank">The Pakistani currency</a> is being exchanged in the black market, often at 10 per cent over its advertised rates.</p>.<p><strong>Pakistan’s dependence on IMF bailout</strong></p>.<p>Previously, the IMF aided Pakistan with $6 million, followed by another $1 million bailout in 2022 during the devastating floods in the country. However, the IMF delayed the next bailout as the country failed to increase energy rates and impose more taxes.</p>.<p>Along with these measures, the IMF pushed Pakistan to allow market forces to play a greater role in setting their exchange rates than artificially capping it. Hence, in order to receive funds, the Pakistani government complied with the IMF.</p>.<p><strong>Positive side of crashing Pakistani rupee</strong></p>.<p>Despite crashing currency, Pakistan’s stock market showed positive signs. The benchmark KSE-100 index rose 2.4 per cent, the most in over five months. Experts pointed at this as evidence of Pakistan welcoming this move, as per <em>The Indian Express <a href="https://indianexpress.com/article/explained/explained-global/pakistan-rupee-plummets-nearly-10-per-cent-what-is-happening-8406688/" target="_blank">Report</a>. </em></p>.<p><strong>Effect of depleting forex reserves</strong></p>.<p>Pakistan is drastically short on forex reserves owing to persistently rising demand for the dollar.</p>.<p>Thousands of shipping containers packed with raw materials for industry, foodstuffs, and medical equipment are being held up at Karachi port because banks have refused to guarantee importers' dollar transactions.</p>.<p>Pakistan also suffered from a nationwide electricity outage earlier this week, linked to a cost-cutting measure, estimated to have cost the textile industry alone $70 million.</p>.<p><em>(With agency inputs)</em></p>
<p>Pakistan is in dire straits due to its collapsing economy. In order to receive financial aid from the IMF, the cap on exchange rate has been removed. As a result, the Pakistani rupee has plummeted to a record low of Rs 255.43 against the dollar in the interbank market on Thursday, sliding Rs 24.54 or 9.61 per cent from Wednesday’s close.</p>.<p>Pakistan agreed to relax its control on exchange rate as it was one of the demands of the IMF to bailout funds to the crisis-hit Asian country. </p>.<p>The IMF pressed for a capping exchange rate as it created black market for dollars and discouraged foreign inflow through regular channels. </p>.<p><a href="https://www.deccanherald.com/business/business-news/pakistani-rupee-plunges-to-all-time-low-against-us-dollar-1184867.html" target="_blank">The Pakistani currency</a> is being exchanged in the black market, often at 10 per cent over its advertised rates.</p>.<p><strong>Pakistan’s dependence on IMF bailout</strong></p>.<p>Previously, the IMF aided Pakistan with $6 million, followed by another $1 million bailout in 2022 during the devastating floods in the country. However, the IMF delayed the next bailout as the country failed to increase energy rates and impose more taxes.</p>.<p>Along with these measures, the IMF pushed Pakistan to allow market forces to play a greater role in setting their exchange rates than artificially capping it. Hence, in order to receive funds, the Pakistani government complied with the IMF.</p>.<p><strong>Positive side of crashing Pakistani rupee</strong></p>.<p>Despite crashing currency, Pakistan’s stock market showed positive signs. The benchmark KSE-100 index rose 2.4 per cent, the most in over five months. Experts pointed at this as evidence of Pakistan welcoming this move, as per <em>The Indian Express <a href="https://indianexpress.com/article/explained/explained-global/pakistan-rupee-plummets-nearly-10-per-cent-what-is-happening-8406688/" target="_blank">Report</a>. </em></p>.<p><strong>Effect of depleting forex reserves</strong></p>.<p>Pakistan is drastically short on forex reserves owing to persistently rising demand for the dollar.</p>.<p>Thousands of shipping containers packed with raw materials for industry, foodstuffs, and medical equipment are being held up at Karachi port because banks have refused to guarantee importers' dollar transactions.</p>.<p>Pakistan also suffered from a nationwide electricity outage earlier this week, linked to a cost-cutting measure, estimated to have cost the textile industry alone $70 million.</p>.<p><em>(With agency inputs)</em></p>