Rupee depreciates 0.60 to new record low

It comes as foreign investors pull out $2b from Pakistan’s debt market

KARACHI: The Pakistani currency failed to continue its recovery phase as it lost Rs0.60 and closed at a new record low of Rs166.14 against the US dollar in the inter-bank market on Monday.

“The rupee started losing ground again (after a day of nominal recovery) due to the demand for dollar from foreign investors pulling out of Pakistan’s debt and stock markets,” Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan said while talking to The Express Tribune.

The rupee had recovered Rs0.59 to Rs165.54 against the greenback on Friday, according to the State Bank of Pakistan (SBP).

Earlier, it lost Rs7.46 (or 4.7%) for three consecutive days (Tuesday-Thursday) last week and Rs11.46 (or 7.43%) during the current month of March to Rs166.13 on Thursday.

The volatility in the rupee-dollar exchange rate returned after a gap of eight months (July-February) as panicky foreign investors pulled out a huge $2 billion from Pakistan’s debt securities like treasury bills and Pakistan Investment Bonds (PIBs) in March amid the coronavirus pandemic.

Besides, they also remained net sellers at the Pakistan Stock Exchange (PSX).

They had invested $3.49 billion in debt securities since July 2019, according to the central bank.

“This is not for the first time that Pakistan has made instant payments to the exiting foreign investors despite that they sold premature bonds (T-bills/PIBs). The country had also facilitated them when they withdrew such investment in 1998 after Pakistan conducted nuclear tests,” Bostan said. “Pakistan has never defaulted on foreign payments. This has built the trust of foreign investors in Pakistan. They are expected to return once the world overcomes the health crisis.”

The rupee is expected to recover in coming weeks since crude oil prices in world markets have dropped to 20-year lows at around $20 per barrel compared to around $60 at the onset of February. This will drastically cut Pakistan’s import bill and ease pressure on the rupee.

Published in The Express Tribune, March 31^st, 2020.

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