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Rupee devalues by 47.1pc against dollar from 2008-13

Rupee devalues by 47.1pc against dollar from 2008-13

ISLAMABAD: Pakistani Rupee devalued approximately 47.1% against US Dollar during period from 2008 to 2013. Rupee met with the worst depreciation in the fiscal year 2009 when it was devalued up to 16.0% and the lowest was in 2011 which was 0.5% only.

Official documents available with Customs Today show that Pak rupee was victim of depreciation against dollar in time span from 2008 to 2013 and it was approximately 47.1%.

The documents further reveal that year wise depreciation was 11.7%, 16.0%, 4.7%, 0.5%, 9.1% and 5.1% in 2008, 2009, 2010, 2011, 2012 and 2013 respectively.

The documents said that depreciation of PKR during the period under consideration was primarily a reflection of weak balance of payment position. The macroeconomic situation deteriorated significantly in FY08 and the first four months of FY09 owing primarily to large exogenous price shocks (oil and food) in the international markets, global financial turmoil, adverse security developments, and policy delays during the political transition to the new government.

During this period the external current account deficit widened to about $13.9 billion or around 8.2 percent of GDP in FY08. With the surplus in the financial account of the balance of payments declining to $8.3 billion, from $10.3 billion in FY07, this led to a decline in the gross international reserves of the State Bank of Pakistan (SBP) of $4.8 billion, to $8.6 billion at end-June 2008. Reserves dwindled further to $3.5 billion as of end-October 2008. These factors kept the PKR under pressure that depreciated by 11.7% during FY08 and 16% during first four months of FY09.

Official papers further said that the government entered into the IMF (SBA) program in November 2008, which gradually improved the reserves level and eased the depreciation on PKR significantly. During FY11, SBP’s foreign exchange reserves touched the highest level of US$14.8 billion and PKR depreciated against US$ by 0.5 percent only.

While the deficit in the external current account remained low, capital and financial accounts continued to decline after FY10. These capital and financial inflows proved insufficient even to finance the small current account deficits in FY12 and FY13. This along with large repayment of IMF (SBA) loans, started since FY12, led to pressures on SBP’s foreign exchange reserves and further fuelled the negative sentiments reflecting on depreciation of the exchange rate during FY12 and FY13.