Pakistani rupee continued to register losses for the third successive session as shrinking foreign exchange reserves amid rising imports and a delay in the funding from the International Monetary Fund (IMF) took a toll on investors' sentiment.
Data released by the State Bank of Pakistan (SBP) showed the local unit closed at 224.16 against the US dollar in the interbank market registering a decline of 0.02% compared to Tuesday’s close of 224.11.
The largest concern is the repayment of external debt, even though the current account deficit is decreasing as a result of currency depreciation and other tightening measures.
Investors are also keeping a close watch on the developments from the IMF. The next $1 billion tranche has been delayed as the government hasn't met the benchmarks necessary to finish the ninth review of the bailout package.
Federal Minister for Finance and Revenue Ishaq Dar claimed last week that Pakistan met all targets for the review. However, the IMF resident chief said discussions with the Pakistani “authorities are ongoing, especially as not all end-September quantitative targets have been met”.
In a major development, the Finance Division on Tuesday rebutted reports of an "economic emergency" being imposed in Pakistan and said such messages were being circulated by elements who do not want the country to prosper.
The statement mentioned that the message is "unfortunately aimed at creating uncertainty" about the economic situation in the country and can only be spread by those "who do not want to see Pakistan prosper".
Despite the rupee’s approximately 21% decline against the greenback so far in 2022, there is a lot of uncertainty surrounding the Pakistani currency. Since 2019, Pakistan has adopted a market-based exchange rate regime.
Even though the official exchange rate has recently remained in the Rs221-225 range, the black market rate is currently trading at a premium of more than 10% at Rs240-250, The News reported.
Except for a few currencies available to travellers at a premium of 3%, there is scarcely any foreign currency supply in that market as a result of the central bank’s strict regulations for exchange companies.
The resurgence of the black market has been badly affecting dollar inflows, particularly inward remittances. Analysts expect the rupee to reach 270 against the US dollar by June 2023.