Pakistan’s devastating floods, the worst in decades, have intensified a shortage of US dollars in the market, raising concerns about the sustainability of the rupee’s recent gains. Currency dealers warned that hoarding and disrupted financial operations are adding to the pressure.
According to Saleem Amjad, CEO of Link International Exchange Co., several banks and exchange outlets have suspended services after floodwaters damaged their branches, leaving dollar supplies severely limited nationwide.
The disaster has already claimed over 930 lives and displaced more than four million people in the past two months. Alongside the humanitarian toll, the floods are disrupting supply chains—from food to foreign currency—further straining an already fragile economy.
The rupee, which has been on its longest winning streak in two years with 25 consecutive sessions of gains, now faces risks of losing momentum. Analysts cautioned that the currency shortage could obstruct imports and complicate Pakistan’s efforts to project stability ahead of its upcoming IMF loan review.
Bloomberg economist Ankur Shukla noted that the floods may put pressure on foreign reserves, which currently cover less than three months of imports, making the rupee vulnerable.
Despite a 1.2% rise since July’s low—helped by tighter military oversight, an S&P Global Ratings upgrade, and a trade agreement with the US—dollar scarcity is prompting some individuals to hold onto the greenback, anticipating a reversal in the rupee’s strength.
Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan, described the situation as temporary, expecting conditions to normalize in about two weeks. However, a survey by Topline Securities earlier this month revealed that half of the respondents anticipate the rupee sliding to 285–290 per dollar by the year’s end.
