Pakistan’s currency has lost 12% of its value against the US dollar in a free fall in the past two days, weakening beyond fair value to an all-time low at Rs262.60 after the free market mechanism was reinstated in the inter-bank market on demand of the International Monetary Fund (IMF).
The weak currency is set to trigger hyperinflation and push economic growth to negative 1% this year compared to 6% expansion last year. The internationally recognised benchmark called the Real Effective Exchange Rate (REER) – the value of local (Pakistani) currency compared to a basket of currencies of trading partners – suggests Pakistani currency has become undervalued compared to the near fair value of Rs230.89/$ on Wednesday.
