Pakistan is grappling with a severe dollar crunch as historic flooding disrupts financial operations and supply chains nationwide, casting uncertainty over the rupee’s recent upward trend.
Over the past two months, catastrophic floods have claimed more than 930 lives and displaced over four million people. The devastation has forced many banks and currency exchange outlets to shut down, leading to a sharp decline in dollar availability, according to Saleem Amjad, CEO of Link International Exchange Co.
The rupee, which had been on a 25-day winning streak—its longest in two years—now faces mounting pressure. Analysts warn that the dollar shortage could hinder imports and complicate Pakistan’s efforts to present economic stability ahead of a critical IMF loan review.
Bloomberg economist Ankur Shukla noted that the floods could further strain foreign exchange reserves, which currently cover less than three months of imports. With supply chains disrupted and dollar access limited, some individuals are reportedly holding onto foreign currency in anticipation of a reversal in the rupee’s strength.
Despite recent gains driven by tighter oversight, improved credit ratings, and a trade deal with the U.S., the rupee’s resilience may be tested as the country navigates the dual challenge of humanitarian recovery and economic stabilization.