Business

Rupee continues to sink

Falls nearly Rs2 owing to IMF programme uncertainty

Omar Qureshi April 20, 2022

Rupee appreciated 1.89% day-on-day, but it was still down 14.7% since the beginning of current fiscal year on July 1, 2021. Photo: file

KARACHI:

The rupee extended its fall and dropped Rs1.9 against the US dollar in the inter-bank market on Tuesday to close at Rs184.44 primarily due to uncertainty about talks with the International Monetary Fund (IMF).

According to the State Bank of Pakistan (SBP), the rupee closed at Rs182.54 on Monday.

“Rupee continues to fall against dollar, losing 1.57% in last two trading sessions,” stated a report of Arif Habib Limited.

It highlighted that the rupee fell 1.03% on a day-on-day basis and had dropped 14.58% since the start of ongoing fiscal year on July 1, 2021.

Lakson Investments Chief Investment Officer Mustafa O Pasha said that the rupee was reversing gains as exuberance faded and economic reality struck the foreign currency market.

“The real effective exchange rate (REER) is currently at 99.3 against three-year average of 98.2,” he said. “The currency may find semblance of stability around Rs186-187 against the dollar and then it will be up to developments on the International Monetary Fund front to dictate the trend of rupee.”

Moreover, the US dollar index breached the 100 mark and it seems set for further gains. This will add pressure to the rupee, he said.

Arif Habib Commodities CEO and Managing Director Ahsan Mehanti told The Express Tribune that uncertainty about talks between the IMF and Pakistan government was taking a toll on the local currency.

“Additionally, the import bill remains high and it is further denting the rupee against the greenback,” he said. “Finally, the latest World Bank report painted a dismal picture of economy and projected a growth of 4% in fiscal year 2022-23. This is also impacting the foreign exchange market.”

AA Gold Commodities CEO Adnan Agar cited that lack of clarity about the IMF loan programme was the prime factor driving the rupee’s decline.

He projected that the rupee would fall until Pakistan and the IMF reached an accord for the disbursement of next loan tranche.

Finally, dollars had flown out of Pakistan over the past few days for different reasons and it would take time to attract the same amount back to the country, hence that factor was also weighing on the local currency, he said.

Published in The Express Tribune, April 20^th, 2022.

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