Rupee takes historic plunge in inter-bank market

Fresh plunge comes amid mounting import payment and foreign debt repayment pressure

KARACHI: Pakistani currency continued to lose ground as it plunged Rs2.94, or 1.92%, to a historic low of 155.84 against the US dollar in the inter-bank market on Friday.

This is the largest drop in a day since the government ended state control of the rupee-dollar exchange rate and allowed commercial banks recently to decide the level under the International Monetary Fund’s (IMF) conditions for a bailout package of $6 billion for Pakistan.

With the fresh drop, the rupee has cumulatively lost Rs7.92, or 5.35%, in the past six working days since June 2. Earlier, the rupee hit an all-time low at Rs156 in intra-day trading.

“Banks are exploiting the situation since the government has allowed them to decide the rupee-dollar exchange rate… in a way to create so-called balance between demand and supply of dollars in the market,” remarked Forex Association of Pakistan President Malik Bostan.

“The practice is feared to badly hit the economy as the central bank will not come forward to intervene in the market.”

Rupee hits all-time low at 152.9 against the dollar

The free float of the exchange rate has overturned the economy. Prior to this, people had stopped making unnecessary purchase of dollars. This was evident from the fact that currency dealers provided over $100 million to the government in the past one month since demand at currency dealers’ counters had dropped to very little, he said.

He smelt international conspiracy in the shape of IMF’s tough conditions for Pakistan to acquire the bailout. “Pakistan is paying the cost of initiating infrastructure development projects in partnership with the all-weather friend China under the multibillion-dollar China-Pakistan Economic Corridor (CPEC),” Bostan said.

Pakistan is to pay $37 billion in foreign debt repayment and interest payment over the next two years and no concrete planning has emerged at the government level as to how it will do so.

“We had proposed to the government to ban unnecessary and luxury imports in order to protect foreign currency reserves. We asked the government to stop banks from facilitating traders in placing import orders without advance payments. However, none of our proposals were taken seriously,” he said.

Gold price hits fresh peak

Taking cue from the international market, the gold price increased Rs2,700 to Rs75,900 per tola.

All Sindh Saraf and Jewellers Association President Haji Haroon Chand said the hike in the local bullion market followed the international market, where bullion prices rose $18 to stand at $1,355 per ounce.

“Rupee depreciation also aided the increase in the precious metal’s price,” he added.

Pakistan issues gold prices every day after incorporating factors like bullion prices in world markets.

Published in The Express Tribune, June 15^th, 2019.

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