Rupee's downward spiral continues, inter-bank rate at Rs242

KARACHI:

The Pakistani rupee hit a new all-time low of over Rs242 against the US dollar in the inter-bank market around midday on Thursday.

The domestic currency slumped a fresh 2.64% (or Rs6.24) to Rs242.26 at around 12:08 pm compared to Wednesday's close of Rs236.02.

With this, the currency has plunged almost 15% (or Rs31.31) during the past 10 working days.

The latest sharp drop in the rupee is seen after the government reported a five-month high current account deficit (CAD) at $2.3 billion for the month of June.

This took the full year CAD to a second historical high of $17.40 billion in the fiscal year which ended June 30, 2022. The massive surge in CAD was financed through the country's foreign exchange reserves.

Accordingly, the reserves depleted to a mere six to seven-week import cover at $9.3 billion as of July 15, 2022, as per the central bank weekly update from last Thursday.

The rupee has continued to decline along with falling reserves, an analyst said.

On the other hand, the resumption of foreign financing is at least four weeks away, as the IMF executive board is scheduled to meet and give final approval for the resumption of its loan programme to Pakistan in late August 2022.

Till then Pakistan has to manage import payments and debt repayments with the available limited forex reserves.

In the meantime, the pressure on the rupee would further increase and political instability will play its role in hammering the local currency.