At 224, Pakistani rupee hits record low against US dollar as economy totters

At 224, Pakistani rupee hits record low against US dollar as economy totters


ISLAMABAD: The Pakistani rupee broke all previous records on Tuesday, falling to a new low of Rs 224 against the US dollar before closing at Rs 222 in the interbank market.
Analysts believe that domestic political and economic situations are not the only factors responsible for the rupee’s devaluation. “The dollar is getting stronger in the global market almost against all the world currencies and the Pakistani rupee is no exception,” said Khurram Shehzad, chief executive officer of investment firm Alpha Beta Core.
According to the Forex Association of Pakistan (FAP), the local currency fell by Rs 8.80 in the interbank market following Monday’s close of Rs 215.20. It, however, closed at Rs 221.99, appreciating 3.1%, according to the State Bank of Pakistan (SBP).
After reaching a peak of Rs 211.93 on June 22, the dollar had started declining for a brief period and fell to a low of Rs 204.56 on July 4. Since then, the rupee has remained volatile.
Shehzad said Pakistan’s external account issues are not settled as yet and the IMF has yet to be on board to release funds. “Global rating agencies have put a negative outlook on the economy, so that is an additional burden weighing on the financial markets in general and foreign exchange market in particular,” he said.
The IMF said Thursday it has reached a preliminary agreement with Pakistan to revive a $6 billion bailout package for the nation struck by a serious economic crisis since last year. Pakistan and the IMF originally signed the accord in 2019. But the release of a slightly over $1 billion tranche had been on hold since earlier this year. That’s when the IMF expressed concern about Pakistan’s compliance with the bailout conditions under former PM Imran Khan.
Khan was ousted in a no-confidence vote in April and the new government under PM Shahbaz Sharif has been in talks with the IMF since May, to avoid a default like Sri Lanka’s.
Malik Bostan, chairperson of Forex Association of Pakistan (FAP), described three reasons behind the constant devaluation of the rupee.
“Investors are jittery at the moment as the Imran Khan-led Pakistan Tehreek-i-Insaf (PTI) has won a landslide victory over Pakistan Muslim League-Nawaz (PML-N) in the Punjab byelections, creating uncertainty over the future of the current political set-up,” the currency trader said. Also, he said speculation that the IMF’s bailout approval would take time and the global moneylender’s statement of being ready to negotiate with a caretaker government have also exacerbated the devaluation.
Additionally, Bostan pointed out that since the Taliban took over Afghanistan last year, Pakistan has provided them trade relief, resulting in extra pressure on the rupee.
Forex experts said the SBP cannot intervene in the rising rupee-dollar parity as the country has agreed with the IMF that the central bank will not interfere.
“Even if it wishes to intervene, the SBP does not have enough dollars to inject into the market,” forex experts said. If the government wants to save the rupee, it will have to curtail imports, they said.





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Author: Shirley