The Pakistani rupee fell to a record low of 287.85 against the US dollar on 16 May amid political uncertainty and the absence of IMF support. The State Bank of Pakistan recorded a loss of Re0.56 or 0.2%. The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) raised the policy rate by 100 bps to a record 21% on 15 May to control inflation, but this and other efforts may be threatened by political and financial risks. Exports, remittances and FDI have not increased despite the currency devaluation; instead, the grey market has thrived. The ECAP cited delays in the resumption of IMF support, continual falls in exports and remittances, and volatile domestic politics as the driving forces behind the currency’s fall. The government’s restrictions on imports were welcomed, but ECAP argued that this has allowed importers to fund themselves, leading to a growth of grey market activity. The US dollar was weak internationally, close to two-month lows, while oil prices were rising as a result of expectations of US crude inventory declines and the latest OPEC+ output cuts.
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