Pakistan currency, Pakistani rupee, pakistan demonetisation
Pictures of Pakistani currency bills lie with old coins and currency notes at a money changer booth along a road in Karachi October 25, 2012 [Representational Image].Reuters

The Pakistani currency's free fall after the announcement of the $6 billing IMF bailout package has continued, with the rupee reaching a level where it's close to becoming the biggest loser in May.

The rupee has dropped more than 5 percent in the aftermath f the IMF bailout. It breached 150 per dollar last week, its lowest level in history. On Wednesday the rupee closed at 149.64 per dollar according to the central bank.

Much of the rupee's pain comes from the terms of the agreement with the IMF, under which the government has to devalue the currency to deal with the ballooning current account deficit.

"This knee-jerk reaction of the market will continue ... Given our large deficit and high debt ratio, the rupee will continue to decline. The rupee will be 200 a dollar by year-end," economist Kaiser Bengali told Bloomberg.

The IMF had warned Pakistan in 2017 that the currency was overvalued by as much as 20 percent. The country's economy is in the grip of a crisis with a soaring debt and rising inflation.

"I expect the central bank to be measured in its approach and intervene only when it's absolutely necessary. The pressure on the rupee will continue and the central bank will allow it to depreciate further in the coming weeks," Ahmed Ateeq, head of treasury at Pak Brunei Investment Co. told the agency.

Prime Minister Imran Khan inherited strident challenges on the economy front with unemployment rocketing and inflation soaring. He replaced the central bank governor while the finance secretary and the head of Board of Investment left their jobs later on.

With foreign currency reserves plunging, Pakistan found its dollar reserves barely enough to cover three mints of imports. The worsening scenario forced Khan to knock at the doors of the IMF, though he had initially tried to survive the crisis by raising billions of dollars in loans from friendly countries like Saudi Arabia, the United Arab Emirates China.

Markets expect the currency to drop further. "Fears of further devaluation as a result of the agreement with the IMF have depressed the currency market and the rupee may lose more against the greenback in the coming days," Secretary General of Exchange Companies Association of Pakistan Zafar Paracha told the Gulf Times.