Pak rupee
Pakistan rupee falls to record low against US dollar on Wednesday prompting Prime Minister Imran Khan to form a special committee to check further devaluation of currency. Image Credit: Social media

Dubai: Pakistan is considering to impose restrictions on the amount of US dollars that can be carried out of the country by individuals, following record devaluation of rupee on Wednesday.

A special committee formed by Prime Minister of Pakistan Imran Khan to check the rupee devaluation, has been given the task to ascertain whether the provision of carrying $10,000 by anyone who travels abroad from Pakistan can be slashed down to $3,000 as proposed by the Exchange Commission of Pakistan (ECAP).

ECAP president Malik Bostan said that by restricting the amount of cash carried abroad by individuals, $2bn could be injected into the local economy every year.

Remittance rush in UAE

Meanwhile, more Pakistani expatriates are rushing to banks and money exchange houses in the UAE to remit money back home in the wake of record fall in Pakistan rupee against US dollar.

The value of Pakistan rupee against one UAE Dirham has reduced to all time low to Rs39.48 on Thursday compared to Rs38.2 a couple of days ago. Bankers say the rupee is likely to fall more in coming days.

The value of the US dollar against the rupee touched all-time high to approximately Rs148 in the interbank market.

The greenback's was valued at Rs141.5 Wednesday morning, but suddenly climbed Rs6.50 to hit a historical peak with speculations that the rupee will further slide.

“We have seen a good increase of people coming to remit money to Pakistan today,” said a salesman at an exchange company in Dubai. He said more people are sending money for family needs.

The benchmark KSE-100 index of stocks fell 1.4%. The currency has plunged more than 20% in the past year, making it the worst performer in Asia, according to a basket of 13 currencies compiled by Bloomberg.

The stock exchange blood bath and rupee devaluation happen three years days after the government of Prime Minister Imran Khan reached an agreement with the IMF for about a $6 billion loan designed to help the country avert an economic crisis. The lender had said in the statement "a market-determined exchange rate'' will helpthe economy.

Why the rupee slides

Abbas Masud, Ex- Executive Vice President of United Bank Limited (UBL) in Dubai, told Gulf News that Pakistan Rupee fell approx 5% today (Wendesday) because of a combination of factors; a decision to totally remove any State support (which was already lessened by the current Goverment) to the currency, as well as negative sentiment, both in lieu of the perceived conditions set in the latest IMF-Pakistan agreement.

He added:"Decline in the fortunes of Pakistan Rupee, was expected in any case, as it was artificially propped up by previous governments. The decline in rupee could for sometime at least lead to further inflation, with the increase in the cost of imports. However, this would provide a boon to exports and also an increase in home remittances; though the inward remittances for investments, may be held back till the prognosis for the economy becomes more clear"

Decline in the fortunes of Pakistan Rupee, was expected in any case, as it was artificially propped up by previous governments

- Abbas Masud, Ex-Executive Vice President of United Bank Limited

IMF deal impact

Most of the currency dealers and experts have already expressed their disappointment over the undisclosed conditions agreed between the IMF authorities and the government.

“Fears of further devaluation as a result of the agreement with the IMF have depressed the currency market and the rupee may lose more against the greenback in the coming days,” Secretary General of Exchange Companies Association of Pakistan Zafar Paracha had said on Monday.

The rate in the interbank is considered the official exchange rate but the open market rate fluctuations and shortage of dollars sometimes compel the State Bank to change the exchange rate. The SBP usually uses banking rates for devaluation of the rupee.

Prime Minister forms committee

Following the collapse of rupee to all time low against US dollar, Prime Minister Imran Khan has set up a committee to control devaluation of the local currency and capital flight from Pakistan.

The committee headed by Adviser to the PM on Finance Dr Hafeez Shaikh was formed on Wednesday during a meeting in which members of the Exchange Companies Association of Pakistan (ECAP) apprised the prime minister about various factors involved in capital flight and devaluation of the rupee against the dollar. The governor of the State Bank of Pakistan (SBP) is a member of the committee, Pakistani media reported.