Daily Times

Keeping its spree of setting new lows intact for the fifth straight session, Pakistani rupee suffered another massive hit on Monday when the dollar rose to an all-time high in the interbank market at Rs194.18. The rupee’s weakest closings prior to this were 192.53, 191.77, 190.02 and 188.66 during the last four sessions of the previous week. The State Bank of Pakistan said in a statement that the rupee opened at 192.53 against the US dollar in the interbank market and closed at 194.18 after shedding Rs1.65 (-0.85 percent). Within the open market, the rupee was traded at 195/196 per dollar against 194/195 a dollar on Friday last.

The rupee has shed Rs5.90 against the US dollar during the last week. Overall, the rupee has depreciated by Rs36.69 against the US dollar during the ongoing fiscal year 2021-22 and Rs17.67 during the current year 2022. The main reason behind this rapid depreciation of rupee is the government’s decision on Sunday to keep the subsidies on oil and electricity intact, which could further delay the finalisation of an agreement with the International Monetary Fund (IMF). Pakistani authorities and the IMF team are likely to resume discussions over policies for completing the seventh review this week. Traders and markets are looking at the IMF as progress with the Fund instils investor confidence in the economy, stabilises Pakistan’s foreign exchange reserves, and unlocks funding from other international financial institutions.

The rupee has come under pressure over the past two weeks as the new coalition government has failed to take decisive economic decisions, most prominent among which is a reversal of fuel subsidies. Analysts and experts have linked the economic pressure to uncertainty over the continuation of the IMF loan programme coupled with a rising oil import bill and widening trade deficit. The government’s indecisiveness over economic decisions is heavily weighing on the local currency.

This sharp depreciation is also attributed to the prevailing uncertainty on the economic and political fronts. Moreover, a higher import bill is also weighing on the local currency. A widening trade deficit has put pressure on the country’s foreign exchange reserves as well, with the central-bank held level falling to below two months of import cover. On the other hand, the total liquid foreign exchange reserves held by the country dropped to their lowest level since December 2019 at $16.4 billion in the week that ended May 6, from $16.5 billion a week earlier. The central bank’s reserves also decreased to a 23-month low to $10.308 billion, the SBP reported on Thursday last.