Pakistani rupee took a plunge this weekend amid reports of a policy decision during ongoing talks with the IMF to allow the currency to adjust to market conditions.
The Pakistani currency touched the lowest mark of 110 rupees to a US dollar during trading on Dec.8 before stabilizing at 107, media reports said. A senior official told Pakistan’s Dawn news the State Bank would now allow the exchange rate to reflect the market conditions.
A delegation of International Monetary Fund (IMF) is in Pakistan for the policy-level discussion to review the economy of South Asia’s second biggest economy that has suffered at the hands of terrorism in recent years.
Pakistani officials say that improvement in security conditions has helped reverse the tide and the country is now seeing increasing investors’ interest in different areas.
The rupee depreciation was witnessed during the first round of talks that ended Friday. A statement from the State Bank of Pakistan said the exchange rate fluctuation was based on demand and supply of US dollars in the interbank market.
Pakistan has long resisted move to allow a free exchange rate mechanism where market forces and currency dealers often manipulate conditions to suit their needs. The currency adjustment is seen to help boost flow of foreign currency to official reserves rather than commercial banks and encourage remittances through official channels.