Pakistani rupee falls to record low as civil unrest compounds country’s problems

Pakistan has a history of military takeovers, political upheaval and social unrest. Khan is the seventh prime minister to be arrested since 1977. 

Pakistan’s economy is also reeling from the worst floods in the country’s history in 2022.  Inflation hit an annual rate of 36.4% in April, with food price inflation at 48.1%. Economic growth is projected to be a dismal 0.5% this year. With about $77.5 billion in loan repayments due by June 2026, and little sign that the IMF will agree on a proposed lending program of $6.5bn, Pakistan remains in danger of defaulting, despite support from China.

Now, these issues are being compounded by civil unrest following Khan’s arrest, said Jameel Ahmad, chief analyst at CompareBroker.io, in emailed commentary.

“There is a risk of the country transitioning from what is already a crisis to a complete collapse should the unrest continue,” Ahmad said. “As an investor, you of course need to and want to take your capital out of such a volatile environment.”

Khan was initially arrested on Tuesday and accused of corruption. Violent clashes between protesters and police erupted in several major cities following his arrest. Police said on Thursday that at least 10 people had died and 2,000 had been arrested, according to media reports.

However, Pakistan’s Supreme Court ruled on Thursday that the former prime minister’s arrest was illegal, and that he should be released immediately, according to media reports. A lower court had previously ruled that he should be held for eight days.

The protests have had a major impact on Pakistan’s economy, as Reuters reported that point-of-sale transactions slumped by roughly 50% in the day following Khan’s arrest.