“Presently, the Pakistani currency is Rs3.2 away from a historic low of Rs139 hit in October,” Paracha recalled. PHOTO: FILE
“Rupee hit (a) low as supply shrank next to nil with the currency dealers at open (retail) market,” Exchange Companies Association of Pakistan (ECAP) General Secretary Zafar Paracha told The Express Tribune. “The recent IMF conditioning to (the government to) devalue rupee to around Rs145-150 against the dollar played on sellers’ mind…people are not coming to the selling counters.”
He added that demand for the dollar remained stagnant against (almost) no supplies and this situation caused rupee to plunge on Saturday.
In historic drop, rupee weakens 7.54% against US dollar
“Presently, the Pakistani currency is Rs3.2 away from a historic low of Rs139 hit in October,” he recalled. It had closed at Rs130.10 to the greenback on Friday, he said. The fresh drop of Rs0.70, or half-a-percentage-point, to Rs135.80 is not a good sign following Saudi Arabia parking $1 billion in Pakistan’s foreign currency reserves this week, he said.
Pakistan Forex Association President Malik Bostan stated that the fresh drop in rupee is seen due to a host of issues that emerged in the last couple of days, including the end of Pakistan-IMF talks on an inconclusive note for a bailout.
“The package, which was being expected by mid-December, has now possibly delayed till (mid or late) January 2019,” he said. The possible delay mounted pressure on rupee with Pakistan’s foreign currency reserves falling to over four-and-a-half-year low at $7.28 billion as on November 16, 2018.
“If the government and the IMF continue to maintain disagreements over further devaluation of rupee, interest rate-hike and upward revision in energy prices in the days and weeks to come then there are chances that the two (Pakistan and IMF) might agree to disagree over a new bailout package…chances for this however remain low,” he expressed concern. “They are expected to find a way forward to drive the country out of the financial crisis.”
Rupee gains 0.68% as dollar inflow continues
Earlier, the State Bank of Pakistan devalued the rupee by a massive 27%, or Rs28.5, in five rounds in the last 11 months to Rs133.99 in the inter-bank market on Friday. The retail market strictly followed the inter-bank. Also, the rupee lost to the low following a massive drop in supply of dollars to the currency dealers as New York was off on weekly holiday. The dollars which overseas Pakistanis dispatched to their homeland on Friday there would be received in the country with a four-day gap on Monday, he said.
Besides, the Financial Action Task Force’s (FATF) recent reminder to Pakistan to improve its international payment system in compliance with international rules for combating terror financing and money laundering, the terrorist attack on Chinese consulate in Karachi and other parts of the country and crackdown on terrorist elements have altogether made the open currency markets uncertain, he added.
Published in The Express Tribune, November 25th, 2018.
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