Rupee falls after dip in reserves

Stands at Rs279.36 to a dollar in inter-bank market

KARACHI:

The stabilising Pakistani currency on Friday ticked down Rs0.03 to Rs279.36 to a dollar in the inter-bank market apparently due to higher demand for foreign currency compared to its supply in the national economy.

The rupee dropped after the central bank reported a day ago that Pakistan’s foreign exchange reserves fell $44 million to $8.01 billion in the week ended February 16, 2024 because of foreign debt repayments.

The currency has cumulatively appreciated 9.93%, or Rs27.74, in the past five and a half months since diving to the all-time low of Rs307.10/$ in the first week of September 2023.

In the open market, the rupee resumed its downturn after a day of slight gains, losing Rs0.08 on a day-on-day basis to close at Rs282.24/$, according to the Exchange Companies Association of Pakistan.

Read Rupee falls to 3-week low against dollar

The currency has dropped a net Rs1.23 in the past 10 days in the retail market. Consequently, the gap between currency values in the two markets further widened to Rs2.88 (or 1.03%). The difference was gradually broadening towards the maximum limit of 1.25% (around Rs4 at current levels) recommended by the IMF under its loan programme.

The currency markets, however, ignored the critical developments that took place in the past one day where the IMF exhibited its willingness to work with the incoming government in the Centre while ignoring the Pakistan Tehreek-e-Insaf’s (PTI) call to show its reaction over alleged rigging in results of general elections.

Government officials claim that the size of the next IMF programme will be around $6 billion, as compared to the current short-term standby arrangement of $3 billion, to ensure hassle-free repayment of foreign debt and build a safe cushion, which will clear the way for liberalisation of economic activities in the medium to long run.

An IMF team will visit Pakistan to conduct a second review under the ongoing programme, which is ending in March-April 2024.

Published in The Express Tribune, February 24^th, 2024.

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