KARACHI: The rupee fell against the US dollar on Tuesday due to increasing political and economic instability in the country.
The arrest of former Prime Minister Imran Khan, along with a warning from an international rating agency that Pakistan could face default without an International Monetary Fund bailout, have contributed to the slide of the local currency.
The currency dropped by 1 rupee, or 0.35 percent, to close at 284.84 per dollar in the interbank market. In the open market, the currency fell by 2 rupees to settle at 290 to the dollar.
Mohammad Sohail, CEO of Topline Securities said Imran Khan's arrest impacted the currency and stock markets.
Grace Lim, a sovereign analyst with Moody's ratings company Pakistan would meet its external payments for the remainder of the current fiscal year ending in June However, the country'sfinancing options beyond June are highly uncertain. Without an IMF programme, Pakistan could default given its very weak reserves., he said.
Pakistan’s foreign exchange reserves are draining fast. The reserves held by the central bank fell to $4.457 billion in the week ending April 28. The reserves cover about a month of imports.
Investors worry that the IMF programme won't likely resume anytime soon. The IMF bailout programme is imminent, but the question is whether we will have it before default or after. "The IMF wants to be super sure about our policies and budget plan going forward, as with only three months remaining of the current government, the probability of taking popular measures to appease voters is high," said Chase Securities in a market note.
“With current reserves and by restricting our imports, we can painfully pass time till budget and until then, the efforts to bridge the external financing gap can also be made. It is also high time that the Finance Ministry clearly and specifically spells out what more is required by the IMF side as the speculation of IMF requirements by different non-government sources is creating a confusion and panic in financial markets."