Pakistani currency depreciated 0.15%, or Rs0.44, to a one-week low at Rs285.40 against the US dollar in the inter-bank market on Wednesday following conflicting reports that the government was considering quitting the International Monetary Fund (IMF) loan programme.
The State Bank of Pakistan (SBP) reported that the rupee had closed stable at Rs284.96 against the greenback on Tuesday.
According to reports, the government was mulling over multiple options regarding the IMF loan programme including wrapping it up in the middle and going for a new loan agreement.
It also considered meeting the IMF’s last condition of winning new financial commitments of $6-7 billion from friendly countries for the resumption of the stalled programme ending on June 30, 2023.
Pakistan’s real effective exchange rate (REER) – the value of domestic currency against a basket of currencies of trading partners – further appreciated to 85.57 in April 2023, according to the central bank data.
REER hit a new record high at 85.57 in April compared to the previous record of 86.60 reached in March 2023, market players said.
Experts pointed out that the rupee would find its fair value when REER moved in the range of 95 to 105 on the index.
REER’s appreciation signals the rupee has continued to weaken significantly over the past couple of months amid depletion of Pakistan’s foreign currency reserves to the critically low level of $4.4 billion.
The undervalued rupee has sharply increased the cost of imports as the national economy largely relies on goods supply from overseas markets. This has contributed markedly to the soaring inflation, which touched a six-decade high at 36.4% in April.
Earlier, the rupee hit a record all-time low at Rs298.93/$ in the inter-bank market on May 11 in the backdrop of a deepening political turmoil and widespread law and order disturbances after former prime minister Imran Khan’s arrest in a case.
Published in The Express Tribune, May 18th, 2023.
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