KARACHI: The pound collapsed on Friday after Britain’s historic vote to leave the European Union, falling 10 per cent against the rupee and other currencies.

Currency dealers in the local market said the pound lost about 10pc within 12 hours of the results of the British referendum as it fell to Rs140 from Rs156 before the decision.

Before the referendum, however, the pound started gaining strength in the international market as well as in Pakistan. The pound gained 3pc against the rupee during the three days before Brexit.

“International currency players had been assuring people that Britain’s departure from the EU would strengthen the pound as the country had enough potential to float freely,” said Malik Bostan, president of the Forex Association of Pakistan. “It’s now clear that they were wrong in their assessments.”

The British pound had already been in trouble from September to March due to subdued Brent oil prices. Currency dealers said the trading of pound came to halt on Friday as the currency was generally not available.

“The daily trading volume of pound is estimated at about three to four million in Pakistan. Therefore, this [Brexit] came as a shock to those having pounds in their pockets or in banks,” said Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan.

Britain is the third-biggest source of remittances for Pakistan. During July-May 2015-16, Pakistani overseas workers in Britain sent home $2.696bn. This reflects that thousands of Pakistanis lost hundreds of millions due to this sudden devaluation of pound.

Mr Paracha said the pound fell below Rs140 after Brexit, but then improved to Rs141. He expects more devaluation in the future.

Faisal Mamsa, CEO of Landmark Investment, said: “I think Brexit will take the financial markets hostage for a long time as it creates a lot of uncertainty, substantially weakens the EU and may persuade the US Federal Reserve to start easing again.”

Eman Khan of Tresmark, a system that tracks markets worldwide, said, “Quite the other way around… we saw Sterling go bust in a matter of hours, but that will stabilise in a couple of days. It’s the euro that will take the hit in the long term as Brexit undermines the credibility of the EU system.”

Reports in the British media suggest that 3m jobs in Britain depend on trade with the EU that could be on risk. Also, the EU takes 45-50pc of British exports, whereas Britain accounts for a tenth of the bloc’s exports.

Supporters of Brexit claim Britain contributes $28bn a year to Brussels and after leaving the EU this money could be useful for Britain.

Published in Dawn, June 25th, 2016