The Pakistani rupee continued its free-fall and crossed the 210 threshold against the US dollar (57.22 against the dirham) for the first time in the interbank market on Monday.
The local currency remained highly volatile as it plunged to a record low of over Rs211 (57.49 against the dirham) against the US dollar during the intraday trading and closed at Rs209.96 against the greenback (57.20 versus the dirham) in the interbank market after losing Rs1.21, or 0.58 per cent, according to the State Bank of Pakistan (SBP). This is the seventh consecutive decline in the rupee’s value, losing approximately Rs6, or over three per cent.
In the open market, the rupee was changing hands at 215 against the US dollar (58.58 versus the dirham) as the importers were keen to buy the greenback to pay their import bills before June 30.
“The US dollar was available at Rs211.21 in early trade after traders resorted to panic buying on reports that some commercial banks had run out of the foreign currency,” according to a banker.
Rupee will remain under pressure
Analysts and market experts said the rupee will remain under pressure as demand for the greenback continues to soar due to quarter-end payments. They said widening trade deficit, shrinking foreign exchange reserves, declining foreign direct investment and political instability will continue to weigh on rupee’s near-term outlook.
“The rupee will remain under pressure until the government manages to revive the $6 billion IMF programme,” Samiullah Tariq, head of research at Pakistan Kuwait Investment, said.
He said investor confidence will only be restored only with the International Monetary Fund programme as the country’s foreign exchange reserves are unable to support the rising import bills.
“The IMF deal will bring economic stability and ultimately benefit the rupee,” Tariq said.
The Pakistani rupee is one of the worst performers in the world as it has depreciated by 14.57 per cent against the dollar this year. The Sri Lankan rupee has been the worst-performing, plummeting 43.9 per cent, with the Laotian Kip battering 24 per cent, Turkish Lira 23.18 per cent, and Ghana Cedi 22.33 per cent, respectively.
The IMF talks resume this week
Meanwhile, Pakistan’s finance minister Miftah Ismail on Monday said that the stalled assistance package of the IMF would be revived this week.
“We will resume talks with the IMF within a day or two,” Ismail said while talking to journalists after a meeting of the Senate Standing Committee on Finance in Islamabad.
“The government has fulfilled all conditions and the Extended Fund Facility (EFF) would be reached ‘within one or two days’,” the minister said.
The government expects to get $1 billion immediately, which will be a huge boost for its foreign exchange reserves, which fell below $9 billion last week. The IMF had approved $6 billion extended fund facility in July 2019 but only reimbursed $3 billion so far.
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