The Pakistani rupee on Friday hit a new record low of Rs192.53 against the dollar after declining by 0.39% or 76 paisas in the inter-bank market, as it continued to nosedive against the greenback for the sixth consecutive working day.
The rupee briefly hit intra-day all-time low of Rs193 before partially recovering to close at Rs192.53.
The domestic currency had closed at Rs191.77 against the global currency on Thursday, according to the State Bank of Pakistan (SBP).
The latest depreciation was recorded following the central bank’s report on Thursday that the country's foreign exchange reserves had depleted to a 22-month low at $10.3 billion in the week ended on May 6, 2022.
"The rupee is weakening due to inability of the new coalition (PML-N) government in parliament to give an economic roadmap," Arif Habib Limited (AHL) Head of Research Tahir Abbas told The Express Tribune.
Last month, the rupee had recovered to Rs181 after the PML-N formed its government in mid-April from the then all-time low of Rs188.18 recorded on April 7.
The recovery was seen soon after former PML-N finance minister Ishaq Dar said in an interview that the rupee should recover to Rs160 soon.
The domestic currency, however, failed to sustain the mid-April gains, as the country's balance of international payment crisis continued to worsen with non-stop depletion in the foreign exchange reserves by every passing week.
Alone in the past six consecutive working days, the rupee cumulatively lost 3.68% (or Rs6.84) to Rs192.53 as compared to Rs185.69 on April 30.
The dwindling reserves continued to weaken the country's balance of payments. Accordingly, the country's ability to pay for imports and repay foreign debt contracted during the past several months.
The $10.3 billion reserves reduced the country's import cover to less than two-month as compared to the usual three-month.
"Pakistan's default risk is on the rise, as dwindling reserves have squeezed the country’s capacity to pay for imports and repay foreign debt," Abbas said. "Pakistan has no option but to resume the IMF (International Monetary Fund) multibillion dollar loan programme at any cost."
To recall, Pakistan is scheduled to resume talks with the IMF on May 18 in Doha for the revival of the loan programme.
The global lender, however, has put tough conditions to revive the programme including removal of subsidies being paid on petroleum products and electricity to end-consumers.
It has been over a month that the incumbent government came to power following the ouster of the PTI government through a no-confidence vote. However, the incumbent government has not yet taken the pre-requisite measures of rolling back the subsidies.
It apparently ceased to withdraw the subsidies amid growing political pressure from the ousted former prime minister Imran Khan, as the PTI has demanded an early election in the country.
"The ambiguities in its (PML-N) economic policies kept mounting pressure on [the] rupee," he said.
It is highly expected that the government would announce withdrawing some of the subsidies on May 15 ahead of the resumption of its talks with the IMF on May 18, he said.
The IMF programme is on hold for the past 11 months.
The success of the talks would follow the release of the IMF tranche of $1 billion to Islamabad to stabilise the foreign exchange reserves. The revival of the programme is likely to be followed by additional inflows from bilateral and multilateral lenders, including Saudi Arabia, the United Arab Emirates (UAE) and China.
Subject to the financial watchdog's conditions, Prime Minister Shehbaz Sharif will have to overcome all obstacles likely to be presented by his cabinet members before talks resume and finalise a decision on fuel subsidies.
Sources told The Express Tribune that the premier had directed the finance ministry to once again ask the IMF to partially relax its condition of increasing fuel prices.
The development comes amid a delay in finalisation of new loan deals with Saudi Arabia, China and the UAE.
Experts recalled that the rupee had depreciated by Rs33 to around Rs98 against the dollar during the Pakistan Peoples Party’s (PPP) five-year tenure that was completed in 2013.
However, the rupee dropped to around Rs115 against the dollar during the PML-N tenure (2013-18) due to the ever-mounting foreign debt.
The rupee fell by a massive Rs73 to Rs188 during the PTI’s three-and-a-half-year rule from August 2018 till the first week of April 2022.
Further, Finance Minister Miftah Ismail held the previous PTI-led government responsible for the current economic crisis in the country, saying that former prime minister Imran Khan-led regime’s “flawed agreement” with the IMF led to a rise in inflation and depreciation of the rupee against the dollar.
“If we get out of the clutches of the agreement Imran Khan inked with the IMF, only then the rate of dollar will come down. Reviving the economy that Imran Khan left is not an easy task,” he said in a statement on Friday.
He added that the subsidy on petroleum products announced by the PTI government had put financial pressure on the economy.
Fuel subsidies were estimated at Rs120 billion this month, the minister said, adding that no government could bear the burden of such a large amount of subsidies. If the government had no money and still gave subsidy, it had to borrow more, he added.
Pressure on the rupee was mounting due to rising interest rates and Imran Khan-led government borrowed loans worth Rs20,000 billion which was the largest-ever amount in the country’s history, Miftah said.
Due to this debt, the PML-N government came under severe financial pressure and the foreign exchange reserves left by the previous government were only sufficient to pay for only a few days of the import bill, he added.
Miftah said the PTI government violated the conditions of the IMF agreement which put the programme on hold.
“We have to renew the IMF agreement. Imran created problems in relations with all countries, including China and Saudi Arabia,” he added.
Holding former premier Imran responsible for the present economic catastrophe and the dollar's unprecedented flight against the rupee, Minister for Information and Broadcasting Marriyum Aurangzeb on Friday said that the PTI regime plunged the country in the quagmire of problems.
Giving her reaction to the statement of PTI leader Fawad Chaudhry, she said that Imran was squarely responsible for the dollar's historic flight against the Pakistani rupee.
The minister said that Imran had signed an agreement with the IMF and the people of Pakistan were facing high inflation as a result.
The minister said that the people faced "economic terrorism" in the country due to the “inefficient and incompetent Imran government as well as cartels and mafia raj” for nearly four years.
“Today, the economic instability in the country is the outcome of Imran's policies,” she said, adding that in the case of petroleum, the former PM had done irreparable damage to the economy only to divert attention from his failed politics.
"Imran sahib is responsible for the difficult decisions being taken now," she said, adding that the PTI chairman had (once again) climbed on the container to cover up his anti-people economic crimes.
She reminded Imran that putting the country's economy and people's future at stake for political purposes was tantamount to treason.
Marriyum said that it was ironic that the PTI regime's incompetence and bad economic policies were the reason behind the inflation being faced by the people, but now they were making the noise about inflation.
She advised Imran that instead of making hue and cry, he should hold himself accountable for inflation and economic crisis.
“Four years of incapable, inefficient and incompetent rule accompanied by cartels and mafias carried out economic terrorism against the people.”
(With input from app)
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