After the fall of British Raj Britain, India emerged as two independent states; Pakistan as a Muslim majority state and India as a Hindu majority state. Initially, both nations used the pre-existing currency note and coins with a stamp of Pakistan’s government. Later on, the state bank of Pakistan issued new banknotes in 1948. However, the US dollar has a long history and a solid background, yet 1 USD to PKR in 1947 was never equal. Even though after partition, 1 GBP was equal to 13.33 Pakistani Rupees and at that time and 1 USD to PKR in 1947 was 3.31 Pakistani Rupees. Probably it was the cheapest exchange rate in the history of USD and PKR relations.
Everyone in Pakistan knows that Before our independence British rules us. So when Pakistani people got independence, Pakistani people had adopted Sterling Pound. In 1947, 1 Sterling Pound is equal to 13.13 Pakistani rupee. At that Time, 1 Sterling Pound is equal to 4.03 US Dollars. So if we convert Pakistani rupee to USD according to Sterling Pound, 1 USD to PKR in 1947 was equal to Rs 3.31. Many people says that in 1947 1 USD was equal to 1 Pakistani rupee But this is not true.
We already told you that in 1947 Pakistani government did not adopt USD as a foreign exchange currency. So you people might think that when Pakistani Government was adopted USD (Dollar) as a foreign exchange currency. Don’t worry, we will tell you everything about USD. If you are history Curious people you might know that in early 1970, USA economy dominated the whole world. So due to the USA Economy influence, On 17th September 1971 Pakistani government adopted USD as a Foreign Exchange Currency. After that we saw some time Pakistani Rupee was strengthening and Some time saw USD Dominating Pakistani rupee. On 6 Aug 2020, We saw one USD was equal to 168.8777 PKR, Which is highest till now.
It's a misconception that the rate of 1 USD to PKR in 1947 at the time of independence was equal. However, Pakistan rupees pegged to Britain sterling and remained stable against the US dollar. The apparent reason was a strong backing from Britain pound to PKR that kept 1 USD to PKR in 1947 below 10 PKR.
Before the Bretton wood System's termination, the government pegged PKR to USD at a fixed rate and backed by the US gold. The PKR currency holds the status to convert into gold on demand, but later it attains floating currency. The floating currency means Fiat money, and the government balances the supply and demand and convertible against the agreed currency rate. Also central bank is responsible for buying and selling currency to maintain the range.
First Elevation USD to PKR
Later on, when President Zia UL Haq shifted the currency to a managed float, the USD against PKR suddenly elevated to peeks. In a Managed float, no country could keep the fixed-rate regime after Breton wood System collapsed. The Ultimate solution was to stay on managed float policy, and consequently, the PKR lost the value by 38.5%, and the cost of import suddenly rose. However, Pakistan's state bank stabilized the situation and maintained the current account surplus to push up the value of Pakistani rupees against USD.
2nd Elevation Period
Since 1982 the rate of 1 USD to PKR keeps rising compared to 1 USD to PKR in 1947. After the nuclear test in 2002 made the country influential, but its currency vulnerable, with meager reserves and specific freezing of resident foreign currency accounts. The dual exchange rate policy helped manage the chaotic period, consisting of an official exchange rate fixed at PKR 46/USD and a floating rate defined through demand and supply of foreign exchange in the interbank market. The alliance of Dual rates in May 1999 established a market-based floating exchange rate regime.
Perhaps the currency of Pakistan jolted severely in 2008 and termed as a disaster year for PKR. In this period, the PKR lost 23% of value against USD and fall to almost 79.2 Rs per USD. The main reason was that Militancy and Afghanistan and the US war after 9/11 impacted the Pakistan economy significantly.
The uncertain political conditions and lack of security depleted the foreign investments, and foreign exchange reserves fell disastrously. The ultimate option to get back from the scenario was to borrow money on interest and regain the foreign investor’s trust. However, it reduced Pakistan's economic independence and burdened the economy with excessive loans.
3rd Elevations Current Status
Perhaps at the time of independence, Pakistan was not stable politically, but the economy was fresh and long-lasting than today. Therefore, the least rate of 1 USD to PKR in 1947 is evidence of Pakistan's booming economy at that time. However, currently, the overwhelming loans and interests with unstable political conditions drive the economy to depend upon IMF plans. The PKR against USD is now at the lowest in history, around 1 USD to 160 RS.
Future Predictions of Pakistan Economy
The fantasy that a more robust domestic currency makes a country strong is hard to dismiss from everybody's mind. Certainty is just the opposite of developing nations. More vulnerable money helps a country grow sustainably by provoking economic agents to invest in trading production and depressing import growth. Already Pakistan's government approved the 22nd IMF loan to control the balance of payment deficit and restore foreign reserves.
Therefore economists predicted a promising future of Pakistan's Economy and considered Pakistan as an emerging marketplace. Economists termed it a take-off stage, and it will turn low-income countries into middle-income countries in the next five years. Indeed, the USD to PKR is also on streamline and hopefully revive the same rate of 1 USD to PKR in 1947. With increasing trade system with Super Powers and stable economic environment preserves the exchange rate and maintains the stability.