Memes and tweets aside, is anyone really surprised by the rupee’s recent devaluation? Does anyone expect it to not depreciate further?

Since 2018, all countries have witnessed the global fallout of the pandemic and the Ukraine-Russia war. While the Indian rupee and the Bangladeshi taka depreciated 28pc and 27pc, respectively, since January 1, 2018, the Pakistani and Sri Lankan rupee devalued by 120pc and 138pc, respectively.

The latest slide in the Pakistani rupee is an expected shock as the formal and informal markets align, but it was a long time coming. Among the unexpected booms of Covid-19 was the uptick in exports and the relative stability of the rupee; the annual double-digit depreciation of the rupee slowed down to single digits during the lockdowns.

The Ukraine-Russia war and domestic political instability exacerbated the rot that was decades in settling in. The relatively stronger economies were able to survive intact, while Pakistan and Sri Lanka entered a downward spiral. After declaring default in July last year, the Sri Lankan rupee stabilised. By fulfilling the demands of the IMF, Pakistan will avert bankruptcy, but its rupee will continue reaching new lows..

Published in Dawn, The Business and Finance Weekly, January 30th, 2023