KARACHI, Pakistan - Pakistan’s rupee dropped to a record low on Wednesday to close at 169.12 against the U.S. dollar, a depreciation that some currency dealers blamed on an outflow of dollars to neighboring Afghanistan, where the banking system has been in disarray since U.S. and allied troops withdrew and the Taliban took over.
The Pakistani rupee has lost around 9% against the dollar in last four months.
On Tuesday, the dollar hit a previous high of 168.94 rupees, shattering investors’ confidence in the unit and exchange rate stability.
The rupee has been losing purchasing power rapidly in the domestic market, causing a rise in inflation that has badly hurt consumers.
“At present, around 25% dollars (of the total available in Pakistan) is going to Afghanistan from Pakistan’s northwestern city of Peshawar,” Malik Bostan, chairman currency traders association told Hum News, a private news channel.
Before the Taliban takeover of Kabul, every 15 days, U.S. planes used to bring in $500 million to Afghanistan, he said.
The cash was distributed to NATO forces and the government and used to trickle down in the market, and at the time, the dollar was cheaper in Afghanistan than in Pakistan.
Around $5 to $6 million used to flow into the Pakistani market on a daily basis that has ended now with the U.S. pullout, Bostan said.
The State Bank of Pakistan earlier indicated that the dollar could appreciate during the current financial year due to an expected higher current account deficit.
The “country’s high current account deficit for the past four months has contributed to rupee depreciation,” Samiullah Tariq, head of research and development at Pakistan Kuwait Investment Company (Private) Limited, told Reuters.
Demand for dollars is higher than supply, he added.
(Reporting by Raza Hassan; Editing by Bernadette Baum) ((email@example.com;))