Dollar touches all-time high of Rs190 as PSX sheds 500 more points

Forex depletion to critical level mounting pressure on Pakistani rupee

KARACHI:

Pakistani currency hit a new all-time low of Rs190 against the US dollar in intra-day trade in the interbank market on Wednesday.

Besides, the Pakistan Stock Exchange (PSX) lost over 500 points.

The rupee and stocks both nosedived ahead of the resumption of talks with the International Monetary Fund (IMF) in Doha on May 18 for the revival of the multi-billion dollar loan programme.

The IMF has put tough conditions to resume the programme like withdrawal of subsidiaries on petroleum products and electricity, and new taxes in next the fiscal year budget 2022-23. The compliance with these new conditions could push the inflation to 15% from 13.37% in April.

Topline Securities CEO Muhammad Sohail told The Express Tribune that renewed pressure on the rupee was partly seen due to the strengthening of the US dollar against majority currencies around the world.

Read PSX bleeds over 1,000 points amid political, economic uncertainty

The delay in the resumption of the programme has ceased the flow of foreign currencies into Pakistan, including from friendly countries like Saudi Arabia and the United Arab Emirates.

Accordingly, the country’s foreign exchange reserves have depleted to a critical level and mounted pressure on the rupee. The IMF programme has been delayed due to almost no progress on the pre-set conditions for the resumption of the programme, which has been on hold since June 2021.

In late April, the IMF asked Pakistan to withdraw subsidies on petroleum products and electricity to resume the loan programme, as the subsidies were consuming over Rs90 billion a month, which the cash-strapped country could not afford.

The PML-N coalition government is most likely to gradually start withdrawing subsidies on energy products for the end consumers ahead of talks with the IMF in Doha.