In early July 2017 the financial markets in Pakistan witnessed a sudden and unexpected 3.1% decline in the value of the Rupee against the US dollar, leading to somewhat of a panic situation in the market, and sparking a shortage as dealers opted to hold the currency rather than sell. The dollar rose to Rs.108.50 against the Rupee, before settling at a level of Rs.108.25 by close of trading hours. This was the largest single drop in the value of the Rupee against the dollar in a nine-year period.
In the immediate aftermath rumours and conspiracy theories surfaced about what had triggered the decline, as individuals and institutions started coming up with alternative scenarios. The Central bank stated that this was a controlled devaluation, which had become necessary due to the rising external account deficit. As per the State bank of Pakistan (SBP), “The exchange rate adjusted in the market and ….. this depreciation in the exchange rate will address the emerging imbalance in the external account and strengthen the growth prospects of the country …… the current exchange rate is broadly aligned with the economic fundamentals.”
Read Complete Article: RUPEE: DEVALUATION OR ADJUSTMENT
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