Pakistani Rupee (PKR): Definition, History, Currency Values

What Is the Pakistani Rupee (PKR)?

The Pakistani rupee, abbreviated PKR, is the national currency of Pakistan. The Pakistani rupee is made up of 100 paise and is represented locally by the symbol Rp or Rs. The PKR is often referred to as rupees, rupaya, or rupaye. The word “Rupee” originates from the Sanskrit word rup or rupa, which means “silver” in many Indo-Aryan dialects.

As of Jan. 25, 2023, $1 U.S. is worth roughly 231 PKR.

Understanding the Pakistani Rupee (PKR)

When Pakistan became independent from Britain in 1947, the Pakistani rupee replaced the Indian rupee. Initially, they continued using the British notes and simply stamped “Pakistan” over them until they began printing their own notes the following year.

The rupee was decimalized in 1961, replacing the 16 annas that the rupee was originally divided into with 100 paise (paisa singular).

Coins denominated in paisa were no longer legal tender after 2013. The 1-rupee coin is the minimum legal tender. A 5-rupee coin was introduced on Oct. 15, 2015, and a 10-rupee coin was introduced in 2016.

There are a number of banknotes in circulation today: Rs 10 (10 rupees), Rs 20, Rs 50, Rs 100, Rs 500, Rs 1,000, and Rs 5,000. Additionally, there is a 50th anniversary Rs 5 banknote. It commemorates the 50th anniversary of the independence of Pakistan.

Initially, the rupee was pegged to the British pound. However, in 1982, the government adopted a managed float policy—meaning that the nation’s central bank routinely intervenes to keep the currency in a specific price range. However, this caused financial mayhem.

For the next five years, the rupee fell nearly 40% against the British pound, and the cost of imports surged, crippling the already fragile economy. The currency remained under pressure until the turn of the century, when the State Bank of Pakistan finally lowered interest rates and purchased U.S. dollars to curb the falling value of the currency.

Pakistan’s Economic Prospects

Like most emerging market currencies, the Pakistani rupee plunged during the global financial crisis, losing more than 20% against the U.S. dollar in 2008. Since that time, the rupee has continued to depreciate against the greenback, exasperated by the country’s large current account deficit.

Because of the fragility and volatility of its economy, the Pakistani rupee does not have any strong correlations with other currencies, financials, or commodities. However, in June 2022, investment research firm MSCI upgraded Pakistan to “Emerging Markets” status due to the country’s favorable demographics and increased economic ties with China.

The South Asian nation sits poised to benefit from increased investment from Bejing’s One Belt One Road (OBOR) initiative and the China-Pakistan Economic Corridor (CPEC)—a 1,864-mile (3,000-kilometer) network of roads, railways, and oil and gas pipelines between the two countries that is expected to bolster the Pakistani economy through 2030.

IMF to the Rescue

While growth in Pakistan at the end of 2019 was less than projected, the country shored up a conditional multiyear $6 billion bailout program from the International Monetary Fund (IMF) to deliver structural reform and address critical macroeconomic issues. However, the most recent bailout tranche stalled in November 2022 amid differences over a program review.

In January 2023, Pakistan’s government indicated its readiness to revive negotiations with the Washington-based lender as its foreign exchange reserves slumped to an all-time low of $11.7 billion in December 2022—around half the amount it held at the start of last year. To resume the economic rescue program, the South Asian nation must meet stringent conditions imposed by the IMF, which include a market-based exchange rate, increased energy pricing, and the imposition of new taxes to account for revenue slippage. A successful revival of the bailout could potentially lend support to the embattled rupee.

With mounting debts of more than $8 billion in the coming months and the country’s aging energy infrastructure needing urgent upgrades, it’s becoming increasingly likely that the Pakistani government will agree to the IMF’s demands. In January 2023, a nationwide power outage left more than 200,000 without electricity, highlighting the urgency of securing financial assistance.

The Bottom Line

The Pakistani rupee, which comes in various coin and banknote denominations, has been Pakistan’s national currency since the country’s independence in 1947. Since 1982, the rupee has remained under a managed float policy. However, the Pakistan central bank’s routine intervention to keep the currency in a specific price range has caused financial mayhem.

As a condition to revive a multiyear, $6 billion bailout program in 2023, the IMF has requested that the rupee move to a market-based exchange rate, among other economic stipulations. The rupee has consistently depreciated against the U.S. dollar since the global financial crisis due to Pakistan’s increasing national debt and political instability.