An overvalued exchange rate makes Pakistan's exports artificially expensive in foreign markets (reducing export competitiveness) while making imports artificially cheap (incentivising over-importing). This structurally worsens the current account deficit and depletes foreign exchange reserves as the State Bank defends the peg. When the overvaluation eventually corrects — as in 2018–19 and 2022–23 — the resulting sharp depreciation triggers inflation and debt stock expansion. All three options (A), (B), and (C) as stated are negative, but (D) 'None of these' indicates options A–C are wrong; option (C) correctly states the actual implication.