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Untitled Document
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Pakistan |
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During the past five decades, Pakistan's foreign exchange regime has been moving towards a deregulated and market-oriented direction:
Before the 1970s, Pakistan linked its currency, rupee, to the Pound Sterling. With the economic influence of the USA getting more apparent, in 1971, Pakistan linked rupee to the U.S. Dollar.
Pakistan fell into a budget deficit in 1982, when the strengthening U.S. Dollar made remittances abroad through official channels slumped. The plunging black market rate suggested that the rupee pegged to the U.S. Dollar largely deviated from the underlying economic realities. In this view, Pakistan put the rupee on a controlled floating basis, with the currency linked to a trade-weighted currency basket.
In 1998, to alleviate the financial crisis in Pakistan, the authorities adopted a multiple exchange rate system, which comprised of an official rate (pegged to U.S. dollar), a Floating Interbank Rate (FIBR), and a composite rate (combines the official and FIBR rates). Export proceeds, home remittances, invisible flows, and "non-essential" imports can be traded at the FIBR rate.
With the economy recovering from the crisis in 1999, the three exchange rates were unified and pegged to the U.S. within a certain band. This band was removed in 2000.
Now, Pakistan is maintaining a floating rate. Under this exchange rate system, each bank quotes its own rate depending on its short and long positions. Strong competition, however, means the exchane rates vary little among the banks. Under the prevailing Exchange Control Act, the State Bank of Pakistan on application may authorise any person or institution to deal in the foreign exchange market. By virtue of this vested authority, the SBP may determin the extent to which a Bank would be authorized to deal in various currencies.
Resources of reference include:
1. World Currency Yearbook. (WCY)
2. IMF Annual Report on Exchange Arrangement and Exchange Restriction. (IMF)
3. "2000 Country Reports on Economic Policy and Trade Practices: Pakistan", the Bureau of Economic and Business Affairs, U.S. Department of State, March 2001 (CR2000)
4. "2001 Country Reports on Economic Policy and Trade Practices: Pakistan", the Bureau of Economic and Business Affairs, U.S. Department of State, February 2002 (CR2001) |
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Date
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Changes
to the exchange rate regime
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Rupee per U.S. Dollar
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| 1 July 1955 | The Pakistan Puree, devided into 100 Paisa, was devalued from an Official Rate of PRs3.31 to PRs4.76 per U.S. Dollar (WCY 1984, p. 585) | 4.760 | | 1 July 1955 | The Pakistan Puree, devided into 100 Paisa, was devalued from an Official Rate of PRs3.31 to PRs4.76 per U.S. Dollar (WCY 1984, p. 585) | 4.760 | | 1 July 1955 | The Pakistan Puree, devided into 100 Paisa, was devalued from an Official Rate of PRs3.31 to PRs4.76 per U.S. Dollar (WCY 1984, p. 585) | 4.760 | | 22 July 1970 | A fluctuating Tourist Rate was introduced based upon a 45% Export Bonus Voucher plus its salable premium, thus effecting a partial devaluation. (WCY 1984, p. 585) | | | 15 August 1971 | Following the de facto devaluation of the U.S. Dollar, the Rupee, through its link to the Pound Sterling, began to appreciate against the U.S. Dollar. (WCY 1984, p. 585) | | | 17 September 1971 | Pakistan cut her currency's ties to the Pound and pegged the Rupee to the U.S. Dollar at the previous Official Rate of PRs4.76 per Greenback, thus de facto devaluing the Rupee. (WCY 1984, p. 585) | | | 18 December 1971 | In the wake of the de jure devaluation of the U.S. Dollar, the Rupee's Official Rate against the U.S. unit was left unchanged, thus devaluing Karachi's currency 7.89% in terms of gold. (WCY 1984, p. 585) | | | 11 May 1972 | The Rupee was devalued 56.7% in terms of gold to a new, unified Official Rate of PRs11.00 per U.S. Dollar. A 4.5% fluctuation range for the currency was also introduced. At the same time, the entire Export Bonus Voucher scheme with its complex of accessory rates was abolished. (WCY 1984, p. 585) | 11.000 | | 23 June 1972 | With the debacle of the British Pound, the Sterling Area, of which Pakistan was a member, was dismantled. (WCY 1984, p. 585) | | | February 1973 | In the wake of the U.S. Dollar devaluation, Karachi realigned the Rupee's Official Rate to PRs9.90 per U.S. Dollar, effective February 14th, based on the unchanged gold content of the Pakistan currency. (WCY 1984, p. 585) | 9.900 | | 31 December 1974 | | 9.900 | | 8 January 1982 | The Rupee was devalued when the currency was unhitched from its link to the U.S. Dollar and the fixed Official Rate abolished. A controlled, floating Effective Rate for the Rupee, initially at PRs10.10 per U.S. Dollar, was established in relation to a trade-weighted basket of currencies. (WCY 1984, p. 585) | 10.100 | | 31 December 1982 | | 12.840 | | 31 December 1983 | | 13.500 | | 31 December 1984 | | 15.360 | | 1 January 1985 | Foreigners and Pakistanis can purchase Foreign Exchange Bearer Certificates (FEBC) with foreign exchange only. Denominated in Pakistan Rupees, they can be taken in and out of the country, converted into Rupees or foreign exchange at the Effective Rate, or traded on the stock exchange at a premium of 7.25% at the end of 1986. (WCY 1986-1987, p. 497) | | | 31 December 1985 | | 15.980 | | 31 December 1986 | | 17.250 | | 31 December 1987 | | 17.450 | | 31 December 1988 | | 18.650 | | 31 December 1989 | | 21.420 | | 31 December 1990 | | 21.900 | | January 1991 | Foreign exchange controls were removed, making the Rupee all but completely convertible. (WCY 1990-1993, p. 501) | | | 22 April 1991 | Dollar Bearer Certificates (DBCs) were introduced. Asset holders (resident or nonresident) could now purchase a one-year maturity intrument similar to the FEBC but denominated in U.S. Dollars iwth no questions asked as to source of funds. The return on the DBC is 1/4 of 1% over LIBOR. The can be encashed in Pakistan Rupees or in foriegn currency at the Effective Rate. (WCY 1990-1993, p. 501) | | | 31 December 1991 | | 24.720 | | 1 May 1992 | The rate of return on FEBCs was raised to 15 percent a year from 14.5 percent. (IMF 1993, p.389) | | | 31 December 1992 | | 25.760 | | 31 December 1993 | | 30.150 | | 31 December 1994 | | 30.880 | | 31 December 1994 | | 30.880 | | 31 December 1995 | | 34.280 | | 5 February 1998 | Banks were allowed to quote their own exchange rates for currencies other than the dollar. (IMF 1998, p.686) | | | 24 March 1998 | Banks were allowed to quote their own exchange rates for the dollar within the SBP buying/selling band. The spread between the SBP buying/selling rates was also increased to 1% from 0.5%. (IMF 1998, p.686) | | | 22 July 1998 | A multiple exchange rate system was introduced compirsing an official, an interbank, and a composite exchange rate. Banks were allowed to quote their own exchange rates for currencies other than the dollar. (IMF 1999, p.664) | | | 16 October 1998 | Petroleum and wheat exports became subject to the official exchange rate. (IMF 1999, p.664) | | | 21 December 1998 | The exchange rate arrangement of Pakistan was reclassified from "other conventional fixed peg arrangement" to the category "managed floating with no preannounced path for the exchange rate". The exchange rate is determined in the interbank foreign exchange market as a weighted average of a free interbank rate and the official exchange rate. (IMF 1999, p.664) | | | 18 March 1999 | The weight of the FIBR(floating interbank rate) and the official exchange rate in the composite exchange rate was changed to 95% and 5%, respectively. (IMF 2000, p.680) | | | 19 May 1999 | The multiple exchange system was unified. (IMF 2000, p.680) The rupp was floated only to be informally controlled by the State Bank of Pakistan within a narrow range of 52.10-52.30 rupees to the U.S. dollar. (CR2000, p.3) | | | 30 June 1999 | The exchange rate of the rupee has been de facto pegged to the dollar. Thus, the exchange rate arrangement has been reclassified to the category conventional fixed pegged arrangement from the category managed floating with no preannounced path for the exchange rate. (IMF 2000, p.680) | | | 20 July 2000 | The State Bank of Pakistan removed the band of rupees 52.10-52.30 to the dollar. (CR2000, p.3) | |
Notes: Annotation of the exchange rates listed in the right column of the table.
1. 1955-07-01--1982-01-07: Official Rate
2. 1982-01-08--1998-07-21: Effective Rate (controlled, floating in relation to a trade-weighted basket)
3. 1998-07-22--1999-06: Official Rate (of the multiple exchange system)
4. 1999-06--2000-07: Official Rate. (unified, pegged to U.S. Dollar within a certain band)
5. 2000-07--:Official Rate (Floating) |
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