Pakistani rupee recovered partially by Rs0.47 against the US dollar in the inter-bank market on Thursday and closed at Rs165.81. According to the State Bank of Pakistan (SBP), the local currency had closed at Rs166.28 against the greenback on Wednesday. Earlier, the rupee dropped to a record low of Rs167.43 to the greenback in August 2020. Apparently, the authorities are letting the rupee depreciate to discourage rising imports and encourage exports in an attempt to narrow down the widening trade deficit, which poses a serious threat to the economy. More importantly, the rupee may be moving down in search of a value that will help resume the International Monetary Fund’s (IMF) $6 billion loan programme, which has been on hold for the past two months. The country is set to hold staff-level talks with the IMF to restart the programme next month, ie September 2021. Moreover, there is pessimism in the foreign exchange market because market talk suggests that the IMF will not resume the loan programme until the government of Pakistan raises power tariff.
Published in The Express Tribune, August 27th, 2021.
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