Historical Sketch

Monetary History Overview

The British presence in India began in the 18th century, when the English East India Company gradually expanded its sphere of influence. The colonial administration took over after the Company's demise in 1857. After World War II, Great Britain began to move out of India. In 1947, a partition of British India was implemented, creating India and Pakistan as independent states based on a split between the two dominant religions, Hinduism and Islam. Pakistan consisted of two disconnected areas centered at the Punjab (West Pakistan) and Bengal (East Pakistan). Until 1955, Pakistan had absorbed the so-called "Princely States" which had nominally resisted the British colonialization. The Pakistani state finally broke apart in 1971 when East Pakistan seceded under the name Bangladesh.

After independence in August 1947, the Reserve Bank of India remained the currency institute until the bank's partition and the creation of a separate currency institute could be carried out. The 1948 currency ordinance entitled the bank to issue paper money and therefore created the Pakistani Rupee as national currency. Indian banknotes were overprinted for use in Pakistan from April 1948 while the unamended notes were demonetized in September of the year. The institutional development partition of the was accelerated in May 1948, when Pakistan enacted the State Bank and the transition period with the Reserve Bank as acting currency institute was shortened to end June instead of end of September. In July 1948, the new central bank started operations. The entire partition of the Reserve Bank of India was terminated end September, when also the (unamended) Indian banknotes were demonetized. The State Bank's regular currency issuance began in March 1949. The Rupee was decimalized in 1961 such that now 100 Paisa went to the Rupee instead of 64, a counting that dated back to Mughal times. The Pakistani currency maintained the peg to the British Pound until the British devaluation of September 1949, then repegged to the US Dollar. But the 1949 devaluation was made up in 1955, restoring the original rate against the British Pound and parity with the Indian Rupees. The Indian devaluation of 1966 was not mirrored in Pakistan, where in turn a 55% devaluation was carried out in May 1972. The fixed exchange rate was given up in 1982. Since then, the Rupee has seen a continuous decline with surges in the mid-1990s and, again, since the late 2010s.

Pakistan joined the International Monetary Fund (IMF) on 15.11.1991.

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