5 Historic Times when the Currency Collapsed in Pakistan

 

Currency value acts as a thermometer for a country’s economic health. When a nation faces fiscal mismanagement, political unrest, trade deficits, or external debt, its currency can weaken rapidly. This affects imports, inflation, and the livelihoods of citizens. 

In Pakistan, the rupee has weathered multiple storms, some gradual, others abrupt. Here’s a look at five historic currency collapses in Pakistan, how they happened, and what they signified for the nation’s economy and future.

1. First Major Devaluation – 1972

Following the secession of East Pakistan (now Bangladesh) and the aftermath of the 1971 war with India, Pakistan devalued its currency to stabilize foreign exchange reserves and appease international donors.

  • Year of Collapse: 1972
  • Value From: PKR 4.76 = 1 USD
  • Value To: PKR 11.00 = 1 USD

Reason for Collapse:

  • Loss of economic strength post-1971 war
  • Weak exports and shrinking foreign reserves
  • Pressure from the IMF and World Bank to adjust the exchange rate

2. Nuclear Sanctions and Economic Crisis – 1998

In May 1998, Pakistan conducted nuclear tests and faced immediate global sanctions, freezing aid and foreign exchange inflows. The rupee rapidly depreciated amid economic isolation.

  • Year of Collapse: 1998
  • Value From: PKR 46.00 = 1 USD
  • Value To: PKR 61.00 = 1 USD

Reason for Collapse:

  • International sanctions post-nuclear tests
  • Suspension of IMF and World Bank programs
  • Freezing of foreign currency accounts triggering panic withdrawals

3. Balance of Payments Crisis – 2008

During the global financial crisis, Pakistan faced a sharp drop in reserves, rising oil prices, and political instability. The rupee plunged as inflation and fiscal deficits soared.

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