Default fears keep rupee under pressure

Currency drops 0.05% to new six-week low at 223.92

KARACHI:

The forthcoming repayment of $1 billion by Pakistan for a maturing Sukuk on December 5, 2022 has kept the rupee under pressure against the US dollar as the foreign exchange reserves continued to deplete over the past 11 months.

The domestic currency inched down by 0.05% (or Rs0.11) to a new six-week low at Rs223.92 against the greenback in the inter-bank market on Thursday.

A market expert pointed out that the forthcoming repayment of $1 billion had built pressure on the rupee. Earlier, the delay in International Monetary Fund’s (IMF) ninth review of its $6.5 billion loan programme led to the rupee’s depreciation for the second consecutive working day.

The delay in IMF’s review has blocked new loan inflows as most of the multilateral and bilateral creditors including the World Bank, Asian Infrastructure Investment Bank, China and Saudi Arabia are waiting for the clearance of the review.

These developments are not letting the rupee to sustain recent gains. It had been around 217 to a dollar in the first week of October.

Another expert stated that the IMF was waiting for clarity on the political scene before undertaking the review. If the political uncertainty worsens and the IMF continues to put the review on hold, then there are chances the rupee will face more pressure and may lose significant ground over a couple of months.

It is expected that the political scenario will be clear in the next couple of weeks. “If the situation worsens, the rupee may hit a new all-time low around 250 in the next few months,” he predicted.

Published in The Express Tribune, November 25^th, 2022.

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