Pakistan’s national currency hitting a series of historic lows against the US dollar since the removal of an artificial upper cap on the exchange rate, financial experts fear that ensuing unemployment and poverty could lead to mass social unrest across the country.
The Pakistani rupee has plunged by 16.5 percent to Rs276.58 since January 25 as pressure continues to build for import payments amid the country’s fast depleting foreign currency reserves.
The official reserves have declined to $3 billion, hitting the lowest level since 2000-01 when the forex with the central bank only stood at $1.6 billion. On average, Pakistan needs at least $5 billion to cover one month of import payments.
The extreme shortage of dollar liquidity compelled the government to restrict import of goods, including industrial raw material and essential items, while commercial banks stopped issuing letters of credit (LCs) which left importers struggling to arrange the greenback for already placed orders.
Many Pakistani industries were either forced to shut down their production facilities or scale down operations, paving the way for mass layoffs.
“Because of the slowdown in the overall economic activity, decades high inflation and overall low production by the economy, it is expected that unemployment will increase and we are witnessing that at the moment as well,” Tahir Abbas, head of research at Arif Habib Limited, told Arab News.
The South Asian nation is currently experiencing one of the highest inflation rates that was gauged at 27.6 percent in January 2023. Previously, such levels were recorded in 1975.depreciation of Pakistan’s national currency may ultimately lead to social unrest.
Such situation leads to deterioration of law and order and such signs are already visible in Karachi where muggings and snatchings at gunpoint have significantly increased,
