Rupee sinks to record 197 against USD in inter-bank market

Currency loses value for eighth consecutive day amid lack of govt action

KARACHI:

The Pakistani rupee on Tuesday suffered a significant drop of 1.5% and plunged to Rs197 against the US dollar in intra-day dealings in the inter-bank market.

The fall of the rupee marks the eighth consecutive day of its sink, culminating in a 6% fall (or Rs11.30) to Rs196.99 to date.

The local currency’s devaluation comes ahead of Pakistan’s tentative talks with the International Monetary Fund (IMF) in Doha on Wednesday (tomorrow) to revive the stalled multi-billion-dollar loan programme.

The reactionary decline of the rupee comes in light of scepticism in the market. Stakeholders assume the financial watchdog will not agree to the resumption of the programme following the government’s reluctance to implement the prerequisite conditions.

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The IMF had earlier told the government to withdraw subsidies on petroleum products and electricity, reverse industrial amnesty schemes and increase the rates of taxes in the upcoming fiscal budget.

Industry experts believe the country is desperately in need for the revival of the programme to avoid increasing the risk of defaulting on international payments, specifically on imports and foreign debt repayments.

Moreover, the country’s foreign exchange reserves have depleted to critically low levels, indicating only six weeks of import cover as compared to the usual three-month import cover.

The uncertainty resulted in importers panic buying the foreign currency against limited supplies, as exporters opted to delay receiving their payments from foreign buyers on speculation that the rupee may test around Rs200 soon.

The widening gap between demand and supply of the foreign currency has mounted pressure on the rupee.

Experts believe that the government should either take tough decisions to deal with the growing economic crisis or announce snap elections.