The US dollar touched an all-time high of Rs 148 in the interbank market on Thursday, a day after it bounced back to Rs 144 after reaching an all-time high of Rs 146.50 in the open market on Wednesday.
The rupee weakened by over five per cent, or Rs 7, from Wednesday’s close of 141 in early hours of trade in the interbank.
The drop in rupee comes a day after Prime Minister Imran Khan constituted a committed to control currency devaluation after its free fall reaching 147 in the open market. On Wednesday, He had warned current dealers of strict actions if they were found selling dollar above Rs 144.
Experts said the drop in rupee was expected, as the government agreed to leave inter-bank market free from state control under the IMF’s 39-month loan programme worth $6 billion for Pakistan.
Forex Association of Pakistan President Malik Bostan told a private TV channel that the rupee is expected to depreciate by a further 15 to 20 percent against the dollar by December this year. “Until the foreign exchange reserves situation improves, there is no chance of dollar coming down,” he said.
The foreign exchange reserves held by the central bank shrank 1.5% on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.
Earlier, the reserves had spiraled downwards, falling below the $7-billion mark, which raised concern over Pakistan’s ability to meet its financing requirements. However, financial assistance from the United Arab Emirates (UAE) and Saudi Arabia helped shore up the foreign exchange reserves.
On May 10, the foreign currency reserves held by the SBP were recorded at $8,845.6 million, down $138.5 million compared with $8,984.1 million in the previous week. The decrease was attributed to external debt servicing and other official payments, the statement added.
Advisor to Prime Minister on Finance Abdul Hafeez Sheikh Thursday said the government has taken a few important and tough decisions to improve economy after country’s foreign reserves fell to their lowest of $10 billion.
Addressing a press conference in Karachi alongside Governor Sindh Imran Ismail, Federal Minister for Water Resources Faisal Vawda, Federal Minister for Maritime Affairs Ali Zaidi, and Federal Board of Revenue (FBR) Chairman Shabbar Zaidi, Sheikh said the government is looking to borrow $2-3 billion from the World Bank and the Asian Development Bank to support the rapidly declining reserves. “Approaching IMF is part of the difficult decisions that we are making to save the country from economic turmoil … we are trying to increase employment opportunities and wages for the employed class,” he said. “The economic growth is meager compared to the inflation,” he confessed, but claimed that a user consuming 300 or lesser units will not be effected by any new taxes that might be imposed in the coming budget. He said the prices of gas will also see an increase but 40 per cent of the consumers will not be affected.
Sheikh said the government has agreed on low interest rates for the $6 billion bailout package from the IMF. He said the country’s economic condition was in turmoil when the Pakistan Tehreek-e-Insaf (PTI) government came into power last year. “When this government took control, the total debt on the country was at Rs 31 trillion. In the past two years, foreign exchange reserves have come down from $18 billion to less than $10 billion. The country’s trade deficit, the difference between exports and imports, is more than $20 million annually,” he revealed.
Speaking further about the IMF bailout, he said the government has agreed on low interest rates for the economic package from the global lender. He said the World Bank and the Asian Development Bank are also expected to provide an additional $2-$3 billion following the IMF package.
He said the agreement with the IMF includes a few points that will be beneficial for the poorest segments of the country’s population. “It has been decided that the low-usage consumers will not be affected if electricity prices ever rise. We have set aside Rs 216 billion in the budget for this purpose,” he said.
“On the directions of Prime Minister Imran Khan, his entire economic and financial team arrived in Karachi and met with the prominent businessmen and members of the representative bodies from the city,” Governor Imran Ismail told reporters at the press conference. Clarifying his stance on the KASB merger case, Federal Board of Revenue (FBR) Chairman Shabbar Zaidi said he was not named in the case at all.