Devaluation of Pakistani Rupee, Causes & Effects

Pakistan has experienced one of the remarkable declines in the value of rupee recently. These events of the devaluation of rupee occur every now and then which depicts how the economy is working on both national and international levels. After these dealings of devaluation, there remains no way left but approaching IMF for funds, eventually increasing the debt which indicates harsh times in the future as well.

The question arises that why rupee is devalued so much? How can it influence the economy as a whole? These questions are of great concern to the future as well as present conditions of the nation.

Devaluation of Pakistani rupee is caused by the following factors which are drawn from the overall economic conditions:

  • Pakistan’s economy is facing a huge problem of increased account deficits and balance of payments.
  • The cause of trade deficits which refers to the increase in the outflow as compared to the inflow of national currency.
  • Mostly, the country’s exports consist of raw material like petroleum, chemicals and metals that increase their cost thus making the exports less competitive.

The influences of these declining conditions of the value of rupee are crucial to discuss because of devaluation results in to:

  • Huge new debts.
  • The increasing cost of servicing our external debt.
  • Increase inflation, raising the prices of essential items like petroleum, food and chemicals.
  • Losing international investor confidence that could boost the business sector of the country.

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