Rupee remains stable after hitting historic low

Forex body chief says currency's weakness will be acceptable to IMF

KARACHI: Pakistani rupee remained stable at 133.76 to the US dollar in the inter-bank market on Wednesday following a massive 7.5% drop to a historic low at Rs133.64 a day earlier.

"The return of stability indicates that yesterday's (Tuesday) drop in the value of the rupee will be acceptable to the IMF during negotiations for a bailout programme," Pakistan Forex Association President Malik Bostan said while talking to The Express Tribune.

This week, the government formally announced that it was going to the IMF for a bailout to avoid default on import payments and debt repayments.

The IMF has urged the government to let the currency weaken to Rs145 to the dollar and increase the benchmark interest rate by 250 basis points from 8.5% at present to fix a faltering economy.



Going back to the IMF means the government will agree on implementing the tough economic conditions.

The inter-bank market saw the rupee fall to an intra-day low of Rs134.20 compared to Tuesday's intra-day low of Rs138.

In the open market, the rupee recovered to Rs135 to the greenback from Rs140 a day earlier, currency dealers said.

Pakistan's foreign currency reserves dropped to a critically low level of around one and a half month of import cover at $8.4 billion on September 28, 2018, according to the State Bank of Pakistan (SBP).

An expert suggested last week that Pakistan would need to arrange up to $20 billion to avoid a balance of payments crisis.



The central bank has said that the drop of 7.5% in the rupee's value on Tuesday broadly reflected the current account dynamics and the demand-supply gap in the foreign exchange market.

"The SBP will continue to closely monitor the situation and stands ready to intervene in case of any unwarranted volatility in the foreign exchange market," it emphasised.

The central bank added although the current account deficit narrowed in August 2018, a consistent increase in the oil import bill on account of rising international crude prices had exerted pressure on the foreign exchange market.

"The SBP is of the view that this adjustment in the exchange rate along with the lagged impact of recent hikes in the policy rate and other policy measures to contain imports will correct the imbalance in the external account."