The rupee saw wild swings throughout the year, hitting its record low against the US dollar multiple times, only to end its worst 12-month period since the 2008 global financial meltdown with a massive depreciation of 22%.
Since the turn of the century, the rupee has depreciated in 18 out of the 22 years, with 2022 being the second-worst after 2008.
The rupee closed at 226.43 against the US dollar on Friday (December 30, 2022), after starting the year at 176.51. This was the story in the inter-bank market. The open market and the so-called ‘black’ market have an even more sorry story to tell.
What happened to the currency?
Three finance ministers and an equal number of State Bank of Pakistan (SBP) governors later, one could hope the rupee will show some stability. However, the currency is likely to remain under pressure in 2023 as well. Simple reason — Pakistan sees more outflow of dollars than it sees inflow. The current account deficit may have reduced, but it has come at the cost of massive import curbs, and administrative measures, which the government insists do not amount to market intervention.
At the same time, a delay in the International Monetary Fund (IMF) programme, and an inability to secure inflows from ‘friendly countries’ – inflows that are largely band-aids, and not economic remedies – will keep the currency market under pressure.
Pakistan began 2022 with Pakistan Tehreek-e-Insaf (PTI) at the helm of affairs. Senator Shaukat Tarin was at the top seat of the finance ministry, carrying forward an expansionary economic policy.
During January, the rupee remained largely stable and traded within the 176 bracket. This is when the SBP’s foreign exchange reserves were at a high level.
