KARACHI: The US dollar finally crossed the barrier of Rs200 in the inter-bank market on Thursday, up Rs100 from eight years ago.

The greenback was traded at Rs201.50 in the open market on Thursday.

The inter-bank market reported that the dollar was traded at higher rates during the sessions but was closed at Rs200 with the help of the State Bank of Pakistan. The US dollar gained Rs1.61 on Thursday to reach Rs200, but this was not unexpected for the market due to rising demand, a long queue of importers to pen new letters of credit and the depreciating trend of the rupee prevailing since the beginning of the current fiscal year (FY22).

The US dollar was traded at Rs98.50 in June 2013. It crossed Rs100 and reached Rs107.5 in November 2013, when the new PML-N government took charge of Islamabad.

However, the then finance minister, Ishaq Dar, took a popular decision to bring down the dollar price to Rs98 in June 2014. The decision was well received by the general public, but economic managers, analysts, and researchers saw it as flawed and warned of the consequences. The artificial exchange rate finally weakened the economy, and the government ended its five-year term with a $20 billion current account deficit (CAD).

Since 2014, the local currency has never found strength due to falling exports, lower foreign direct investments, and a huge CAD.

Till August 2014, the exchange rate was at Rs100 per dollar. It remained at Rs105 till the financial year FY17. At the end of the PML-N government term, the exchange rate was allowed to adjust and the dollar shot up to Rs118 in June 2018.

The next government of PIT found the dollar at Rs123 in August 2018. From this point, the dollar kept sliding for a number of reasons, despite the fall in the CAD to $3.5bn in FY21. The deficit is now over $13bn in the first nine months of FY22.

During the PTI government’s first year, the dollar rose to Rs155 in June 2019 before falling to Rs164 in April 2020.This was the beginning of Covid-19 in Pakistan. The hot money of over $3.5bn invested in the treasury bills and Pakistan Investment Bonds by foreign investors, left the country within a few months, thus weakening the rupee sharply.

However, a year later, with the improvement in economic activity and higher remittances along with greater exports, the dollar fell to Rs152 in April 2021, but the exchange rate remained at this level for a brief period.

The rupee started depreciating to reach Rs156 in June 2021. FY22 began with disappointing sessions for the local currency as it started falling each month and then each day, allowing the dollar to cross Rs200. In December 2021, the dollar was at Rs177.

The impact of this depreciation is yet to be calculated, but the consequences are obvious as it plagued the economy with inflation which reached 13.37 per cent in April, negatively impacting each and every segment of life in Pakistan.

The newly established government could not find any solution to this falling rupee while it failed to convince Saudi Arabia, United Arab Emirates and China for help while negotiations with the International Monetary Fund may take enough time to further worsen the exchange rate regime.

Published in Dawn, May 20th, 2022