Depreciation of currency in Pakistan

Causes:
1)Political uncertainty
2)Trade imbalances (current account deficit)
3)Hyper inflation

Effects:
1)No economic growth
2)Raise industrial cost (reduce capacity utilisation)
3) Increase international debt (more loan from IMF)

Depreciation of currency is the decrease in the value of money compare to other currency set as
benchmark by an economy. Pakistan is suffering from economic crises since 1947 after the partition
of sub-continent. Unfortunately, Pakistan depends on international debt most of its independent life
while India and Bangladesh are now independent countries. The main cause of currency
depreciation is political uncertainty as after every few years political bodies are replaced by new
party and they make new policies which reduce government revenue and increase unproductive
activities leading to fiscal crises. Also, due to political conflicts Pakistan is moving towards
economic decline.
Pakistan’s aggregate demand is fulfilled by imported goods as resources are not utilised to produce
goods within a country. Now big firms has reduced their productivity as return on their investment
are not enough to cover their expenses which badly impacts Gross domestic product (GDP) of
Pakistan. Due to reduction in overall productivity, Pakistan is unable to export which results in
current account deficit.
Also, hyper inflation is the most prominent cause for devaluation of currency as prices are
increasing on daily basis which is increasing poverty level of the Pakistan and most of the public
has started depending on government. As more people are unemployed so in order to facilitate them
government has introduce free of cost facilities. Due to lack of legal tender Pakistan has to depend
on international debt which cause increasing loans from IMF and need to pay high interest rate
which directly cause depreciation of currency.