Rupee kicks off new year by hitting 3-month low

Analysts attribute depreciation to low foreign currency reserves

KARACHI:

Pakistani rupee maintained its downtick on the first working day of 2023, falling by 0.22% (or Rs0.51) to a three-month low at Rs226.94 against the US dollar in the inter-bank market on Tuesday.

The rupee has continued to fluctuate over the past three months after recovering to Rs217.79 in early October and has dropped by 4% (or Rs9.15) during the period.

It dropped 22% in the previous calendar year and reached Rs226.63 against the greenback on Friday last week, the last working day of the year.

According to analysts, “the rupee is sliding due to low foreign exchange reserves and high demand for import payments and debt repayment”.

It will continue to decline, considering the International Monetary Fund’s (IMF) condition of a market-based exchange rate for resuming its $6.5 billion loan programme.

Finance Minister Ishaq Dar has partially controlled it. A gradual and continuous drop, however, suggests the government has agreed to restore the market-based exchange rate mechanism.

“The actual value of the rupee is the one being quoted in the black market, where it stands at Rs250-260 against the greenback these days,” said analysts.

Earlier, Dar projected a fair value of the rupee in the range of Rs180-200 after becoming finance minister for the fourth time in late September 2022. It, however, never dropped to that level and recovered to only Rs217.79 in October.

The rupee hit an all-time low at around Rs240 on July 28, 2022. Experts projected that the currency would lose more ground and reach the range of Rs250-270 against the greenback by the end of current fiscal year on June 30, 2023.

Pakistan’s foreign exchange reserves have depleted to a nine-year low at $5.8 billion while the government needs $73 billion to repay foreign debt over three years till the end of FY25.

Published in The Express Tribune, January 4^th, 2023.

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