There is no let-up in the falling spree of Pakistani rupee, which suffered another massive hit on Wednesday when the dollar rose to all-time high in the interbank market at Rs190.02. The rupee’s weakest closings prior to this were 188.66 on Tuesday last and 188.18 on April 7, 2022. The State Bank of Pakistan said in a statement that the rupee opened at 188.66 against the US dollar in the interbank market and closed at 190.02 after shedding Rs1.36 (-0.72 percent). Within the open market, the rupee was traded at 191/192 per dollar against 189/190 a dollar a day earlier.
The rupee has shed Rs4.33 against the US dollar during the last four sessions. Overall, the rupee has depreciated by Rs32.53 against the US dollar during the ongoing fiscal year 2021-22 and Rs13.51 during the current year 2022.
This sharp depreciation is attributed to the prevailing uncertainty on the economic and political fronts. Moreover, 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. The trade deficit has widened 64.79 percent during the first 10 months (July-April) of the current fiscal year 2021-22, amounting to a massive $39.3 billion compared to $23.8 billion during the same period of 2020-21.
On the other hand, the total liquid foreign exchange reserves held by the country decreased for the 12th consecutive week by $115 million (0.7 percent) on a week-on-week basis to $16.55 billion as of the week ended on April 30, 2022.
Pakistan is currently relying on inflow under its Extended Fund Facility (EFF) of the International Monetary Fund (IMF), hoping to convince the lender of releasing its next tranche to boost foreign currency reserves. Pakistani authorities and IMF team will resume discussions over policies for completing the seventh review in Doha next 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.
Asad Rizvi, former treasury head at Chase Manhattan Bank, commenting on the situation tweeted, “Unguarded PKR is directionless that makes everything expensive. The rupee is hitting all-time new lows on a regular basis which has become very common in recent times. Taming inflation is an uphill task, but the market will remain vulnerable to imports and political uncertainty.”