Pakistani currency crashed and crossed Rs205 against the US dollar for the first time in the inter-bank market on Tuesday, as conflicting reports about the revival of IMF loan programme played on traders’ minds and made the foreign exchange market jittery.
The rupee lost 0.63% (or Rs1.30) to stand at Rs205.16 against the greenback compared to Monday’s close at Rs203.86, according to the State Bank of Pakistan’s (SBP) data.
The rupee plunged to a new all-time intra-day low of Rs205.77 before partly recovering by the close of market.
The local currency maintained its downturn for the third consecutive working day. Cumulatively, it has lost 2.18% (or Rs4.39) in the past three days.
In the current fiscal year (July-June 2021-22), the rupee has slumped 30.22% (or Rs47.62) to Rs205.16 compared to Rs157.54 on June 30, 2021.
In his latest statement, Finance Minister Miftah Ismail said the complete withdrawal of subsidies on petroleum products by July was a must to revive the IMF loan programme and avoid default on international payments.
“Markets are uncomfortable due to the uncertainty about the IMF loan programme,” Ministry of Finance’s former adviser Dr Khaqan Najeeb said while talking to The Express Tribune, adding that the country should have initiated the process of reviving the stalled loan programme a few months earlier.
The lingering seventh review of Pakistan’s economy under the IMF programme and downgrading of the country’s credit outlook to negative from stable by Moody’s Investors Service “are also playing on the minds of forex market players.”
He said the pressure of imports had also not eased, which was resulting in a higher demand for dollars, thus pulling the rupee down.
Pakistan’s higher requirement for wheat, edible oil, lentils and cotton amid the rising global commodity prices has also kept the import payments elevated. This year the country will import edible oil worth $8 billion alone. These factors have kept consistent pressure on the rupee against the US dollar.
The stability in the rupee will only come once there is certainty about the staff-level agreement with the IMF. It was expected that before budget, such an agreement would be reached in Doha. “The delay is not good for the markets,” the former adviser Najeeb said.
Published in The Express Tribune, June 15th, 2022.
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