Daily Times

A day after crushing the local currency amid a standoff with the International Monetary Fund (IMF) and a downgrade by Moody’s in its most recent ratings, the US dollar decimated the Pakistani rupee to an all-time low in the interbank market on Thursday, according to the 24NewsHD TV channel.

According to information from the foreign exchange dealers, the value of the dollar increased dramatically by a massive margin of Rs 18.89 against the rupee and was currently trading at a record level of Rs 285 in the interbank market.

Within three days, the US dollar appreciated by a massive Rs25.08 against the local currency.

Marred by economic uncertainty, the rupee has plummeted against the US dollar after the currency registered a depreciation of 1.73% on Wednesday. The rupee downslide was halted at Rs266.11 against the greenback, a decline of Rs4.61 in the inter-bank market.

Rating agency Moody’s has downgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa3 from Caa1. It also downgraded the rating for the senior unsecured MTN programme to (P)Caa3 from (P)Caa1. On the other hand, Moody’s changed the outlook to stable from negative.

Another factor that came down heavily on the money market was the rampant price spiral. Inflation in crisis-racked Pakistan has jumped 31.5 percent according to government data, as Islamabad continued to stare down IMF negotiators withholding a crucial bailout.

Year-on-year inflation for February is the highest in decades, while transport and perishable food costs rose by around half as a cost-of-living crisis continues to bite.

Years of financial mismanagement and political instability have pushed Pakistan’s economy to the brink of collapse, exacerbated by a global energy crisis and devastating floods that submerged a third of the country in 2022.

The country’s forex reserves have dwindled to just $3.25 billion — enough for around three weeks of imports — paralyzing supply chains and causing widespread factory closures.

Prime Minister Shehbaz Sharif is attempting to revive the second installment of a $6.5 billion loan agreement that was drafted with the International Monetary Fund in 2019. However, the international lender is requiring severe reforms, such as tax increases and reductions in subsidies, which is likely to enrage voters ahead of a general election that must take place no later than October.

IMF negotiators traveled to Pakistan last month for a 10-day visit, but they left without reaching an agreement and returned to the US.

Islamabad insisted that an agreement between the two parties was imminent, but the loan has not yet been released.

Even after an agreement has been reached, analysts predict that inflation will increase.