Pakistan’s devastating floods—the worst in decades—are not only wreaking havoc on lives and livelihoods but also sending tremors through the country’s fragile economy. As swollen rivers inundate cities and villages, the disaster is now being felt in the currency markets, with a sharp shortage of US dollars adding new pressure on the rupee.
According to currency dealers, many banks and exchange outlets in flood-hit regions have been forced to shut down operations, either due to physical damage or supply disruptions. With fewer outlets operating, dollars have become scarce across the country.
“The flooding has disrupted everything—from food supplies to foreign exchange flows,” explained Saleem Amjad, CEO of Link International Exchange Co., one of Pakistan’s largest exchange firms.
Human and Economic Toll Intertwined
The floods have already claimed more than 930 lives and displaced over four million masses in just two months. While the humanitarian tragedy remains the most pressing concern, its ripple effects are felt on trade and finance are undeniable.
With supply chains broken, imports delayed, and foreign currency transactions stalled, Pakistan’s ability to keep its economy afloat is under fresh strain.
The rupee had been enjoying a rare winning streak—25 consecutive sessions of gains, the longest in two years—thanks to tighter military oversight of markets, a recent upgrade from S&P Global Ratings, and a trade deal with the United States. But that fragile stability could now unravel.
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Mounting Pressure on the Rupee
Analysts warn that if the dollar shortage persists, it may choke imports and complicate Pakistan’s efforts to reassure the International Monetary Fund (IMF) ahead of its upcoming loan analysis.
“The floods could strain external balances, foreign exchange reserves, and, hence, the rupee,” cautioned Bloomberg economist Ankur Shukla. Reserves already cover less than three months of imports, making the economy highly vulnerable.
Some individuals are now holding on to their dollars, waiting for a reversal in the rupee’s recent gains. Others keep on believing that the disruption will be temporary.
Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, expressed optimism that supply would normalize within two weeks.
Still, a Topline Securities survey showed half of respondents expect the rupee to weaken again, possibly sliding back to 285–290 per dollar by year’s end.
For now, Pakistan finds itself at the crossroads of a natural disaster and an economic storm, with both testing the resilience of its people and its currency.