These policies include pegging the dollar-rupee parity, even borrowing foreign currency loans to maintain the currency peg, managing and keeping the State Bank of Pakistan's policy rate as low as possible, and managing inflation in the country through subsidies and cheap imports due to the fixed exchange rate.[4][5][6]
History
During his term from 1998 to 1999, Ishaq Dar's policies led to economic challenges for Pakistan.[7] Following nuclear tests, the government seized $11 billion from local dollar accounts of Pakistani citizens, after the currency was devalued by 25 percent in the open market compared to the official exchange rate.[8] As a result, Pakistanis living abroad increasingly used hundi rather than official channels.[8] Despite sovereign guarantees, the frozen accounts were converted into rupees forcefully at the official conversion rate of Rs 46 to a US dollar.[8][9] The country was compelled to restructure its debt, effectively resulting in a technical default.[7]
From 2013 to 2017, Dar implemented policies aimed at stabilizing the exchange rate by injecting dollars into the market.[10] These measures were criticized for exacerbating Pakistan's current account deficit which increased from negative $4.4 billion to negative $16 billion, contributing to the country seeking a bailout from the International Monetary Fund (IMF) in 2019.[10][11]
