by A.W. Berry

Created on: September 08, 2009

The currency of Pakistan is the Rupee that consists of both coins and paper notes. 5 denominations of paper rupees are currently in circulation with the highest note value being 5000 rupees which is worth about $60.40 US dollars at the time of this article (09/09) For a current exchange rate of the Rupee into other currencies the following currency converter and official currency valuations can be consulted. This article will look at the currency of Pakistan in terms of its history, and factors affecting its valuation.

PART I: PAKISTAN'S CURRENCY

The circulation of rupees within the Pakistani economy is centrally controlled by the country's state bank and multiple denominations of the Rupee bank notes have a picture of Muhammad Ali Jinnah (2) who was an important figure in Pakistan's independence from India and Britain. Under Jinnah's rule, the Rupee was introduced as Pakistan's currency in 1947. Following 1947, the Rupee underwent some changes including the introduction of higher denominations.

In the years between 1995-2008, the currency of Pakistan devalued almost 200% against the US dollar.(2) This devaluation of the rupee has lowered the financial buying power of Pakistan. The current inflation affecting the rupee is also a cause for concern because it lowers the buying power of the rupee. The Pakistani rupee is affected by multiple variables as does any currency, some of which are listed below with recent trends as reported by tradingeconomics.com. (4)

* Exchange valuation: 82.96 rupees per USD (Negative)
* Inflation: 11-13% (Down)
* Interest rate: 14% (High)
* Central bank reserves: (Down)
* Unemployment: 5.2% (Down)
* Trade deficit: $1.15 USD (Negative)
* Government budget (-$.842 billion USD)

PART II: FINANCIAL FACTORS AFFECTING THE PAKISTANI RUPEE:

Several factors influence the value of the Pakistan's currency; these factors are 1) economic conditions, 2) political conditions, 3) global finance and 4) State financial management. As mentioned above, the rupee has devalued significantly in the last 15 or so years. This is related to several of the following factors that may either have contributed to the decline in the rupee, been a result of the rupees devaluation or a combination of both. For example, even though Pakistan has a positive Gross Domestic Product in 2009, it still has inflation in the double digit, and deficit spending close to 6% of that GDP according to www.economywatch.com (3).

* Lower GDP
* Political conditions
* National credit rating
* Declining

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