What is the PKR (Pakistani Rupee)?

PKR is the currency code for Pakistani rupee, the currency of Pakistan since 1948.

The Pakistani rupee is made up of 100 paise and is often represented by the symbol Rs. Since 1994, due to inflation, the currency is no longer issued in paise, only in full rupees.

One hundred thousand rupees is called a lakh, 10 million a crore, a billion an arab, and 100 billion a kharab.

Key Takeaways

  • PKR is the currency code for Pakistani rupee, the currency of Pakistan since 1948.
  • Because of the fragility and volatility of its economy, the Pakistani rupee does not have any strong correlations with other currencies, financials or commodities.
  • The country's significant debt sometimes results in currency devaluations by the State Bank of Pakistan.

Understanding the Pakistani Rupee (PKR)

The PKR debuted in 1948, after Pakistan became independent from the United Kingdom in 1947. The Pakistani rupee replaced the Indian rupee as currency. Initially, the State Bank of Pakistan continued with the use of British Indian rupees and stamped "Pakistan" over them. It printed its own notes the following year.

Decimalization started in 1961 with the division of each rupee into 100 paise. Previously, a rupee represented 16 annas.

Initially, the State Bank of Pakistan pegged the rupee to the British pound (GBP). However, in 1982, the government adopted a managed-float policy that resulted in unintended consequences. For the next five years, the rupee fell nearly 40% against the British pound, while 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 stop the free fall.

Like most emerging market currencies, the Pakistani rupee plunged during the financial crisis, losing over 20% against the U.S. dollar in 2008. The country's large current account deficit contributed to the decline.

Because of the fragility and volatility of its economy, the Pakistani rupee does not have any strong correlations with other currencies, financials or commodities. It is, therefore traded mainly locally, and is not a favorite of global currency traders, even when paired with other popular currencies.

Influences on PKR

Pakistan is a top 30 global economy as of 2018, based on gross domestic product (GDP). However, its 2018 GDP per capita of $1,196.6 significantly lags that of many of the world's largest economies. For example, GDP per capita in Canada is $51,357.8, while in the United States it is $54,541.7, both in terms of U.S. dollar (USD).

The country's significant debt sometimes results in currency devaluations by the State Bank of Pakistan. Attacks by militants also stymie the economy at times, while also indirectly influencing the currency.

However, government leaders are attempting to spur growth by privatizing government corporations, reducing the current account deficit and attracting foreign investment. Between 2016 and 2018, GDP growth averaged more than 5%. At the same time, inflation was lower than the historical average: 0.4% in 2016, 4% in 2017, and 2.1% in 2018. Prior to this, inflation was often above 6%.

PKR Coins and Bills

Pakistani rupee coins are circulated in denominations of one, two, five, and 10. As for bills, denominations include five, 10, 20, 50, 100, 500, 1,000, and 5,000.

Example of Converting Pakistani Rupees (PKR) to Other Currencies

Assume that the USD/PKR exchange rate is 156. That means it costs 156 PKR to buy one U.S. dollar. In 2016, the rate stayed near 105. The rate climbed in 2018, and by 2019 it was above 150. The rate change means the PKR depreciated over time, since it began to cost more PKR to buy one USD.

If the rate were to decline to 140, the PKR would be increasing in value, since it would cost less PKR to buy one USD.

To find out how many U.S. dollars a single Pakistani rupee can buy, divide one by the USD/PKR rate. If the rate is 156, divide one by 156. This will give the PKR/USD rate (noticed the codes are flipped) of 0.0064. This means a single PKR will buy a little more than half a cent USD.