Foreign exchange reserves of the State Bank of Pakistan (SBP) plunged to $3.678 billion on January 20 from $4.601bn due to external debt repayments.
At this level, the reserves provide imports cover of three weeks against a standard minimum of three months.
The SBP reported a new level of the forex reserves on January 26 and simultaneously removed the cap on the official exchange rate.
Consequently, the rupee nosedived Rs255.43 to a US dollar in the interbank market from 230.89 a day earlier. Then on January 27, the central bank let the rupee fall further — this time to 262.6 to a dollar.
This unprecedented 13.7 per cent rupee depreciation within two days, undertaken to meet a key condition for the resumption of a stalled International Monetary Fund (IMF) loan, is expected to bridge the gap between the interbank and open market exchange rates.