The weakening Pakistani rupee crossed another barrier of Rs201 against the US dollar for the first time in the inter-bank market history, as importers maintained panic buying of the greenback on Tuesday.
The domestic currency dropped 0.24% to a new all-time low at Rs201.41 against the US dollar as compared to Monday’s close at Rs200.93, according to the central bank data.
The rupee maintained its downward streak for the 13th successive working day despite the central bank aggressively increased the benchmark interest rate by 150 basis points to an 11-year high at 13.75% on Monday.
The rate hike, which was higher than market expectations of 100 basis points, was also aimed at arresting the rupee’s free fall.
However, the reports of likely delay in the revival of International Monetary Fund’s (IMF) $6 billion loan programme further accelerated the downtrend in the rupee.
Importers were making panic buying of dollars to pay for the purchases of goods overseas.
The rupee has cumulatively dropped 8.5% (or Rs15.72) in the past 13 days. It is weakening due to the growing shortage of the foreign currency. Accordingly, the country’s capacity to pay for imports and repay foreign debt is declining.
In this backdrop, Pakistan’s Eurobond yields surged to 26%, pointing to an increasing risk of default on payments for the maturing global bonds.
Pakistan is scheduled to repay $4.5 billion in May and June for the maturing bonds, while the foreign exchange reserves fell to just six weeks of import cover at $10.1 billion.
Gold up
The rupee’s free fall continued to cause a surge in gold prices. Bullion became expensive by Rs1,950 to a new record high at Rs143,600 per tola (11.66 gram) on Tuesday.
The surge in domestic gold prices came despite a drop of $4 per ounce (31.10 gram) to $1,858 in the global market, mainly owing to the falling rupee.
Published in The Express Tribune, May 25th, 2022.
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