KARACHI: The rupee on Friday hit an all-time low of 140.24 a US dollar in the interbank trade on import and debt payments with the government detaching the depreciating link from discussions with the IMF for a possible loan deal.
Khaqan Hassan Najeeb, finance ministry’s spokesman said discussions with international partners do not entail any target level of exchange rate.
“Focus is on further strengthening the exchange rate regime, aligning it and keeping it consistent with the evolving macroeconomic fundamentals of the economy,” Najeeb said in a tweet.
The rupee was down 0.53 percent or 75 paisas at 140.24 against the dollar in the interbank market.
The rupee fell to 140.40 to a dollar at one point, but it ended at 140.24/dollar, sharply weaker than its previous close of 139.49.
Currency traders said there was a heavy dollar buying from importers and banks.
The central bank was not spotted intervening during the day despite the demand pressures.
“There were some [in rupee term] Rs76 billion in imports and debt payments-related outflows from the market,” a trader at a mid-tier bank said.
In the open market, the rupee closed at 141.40 against the greenback compared with 140.50 in the previous session.
"The open market was highly volatile,” Zafar Paracha, secretary general at Exchange Companies Association of Pakistan said. “There was a shortage of the greenback as people were reluctant to sell dollars.”
Analysts see entering the International Monetary Fund’s (IMF) program as a basis for a sustained depreciation trend for the domestic unit.
“The rupee is expected to weaken to 142-145 by the end of next month,” an analyst said, requesting anonymity. “It has been discussed with the IMF that complete free-float exchange rate mechanism is not possible in our economy due to the shallowness of the forex market.”
The new IMF mission chief is soon to visit Islamabad for meetings with the authorities to discuss a loan program.
Finance ministry’s spokesman said the government has not ‘clearly’ envisaged any target of PKR/USD exchange rate. “Speculation baseless (is) unfounded,” he added. “SBP (State Bank of Pakistan) economic models point to the real effective exchange rate at equilibrium value.
BOP (balance of payment) stability (is) ensured with a fall in C/A (current account deficit) and more than adequate foreign financing availability.”
Total foreign exchange reserves of the country increased $743 million to $15.709 billion by the week ended March 15. China is expected to release $2.1 billion in commercial loan next week, an injection that will further push up foreign currency reserves.
SBP Governor Tariq Bajwa said foreign exchange reserves are expected to improve further in the coming months.
“The current account deficit has declined by 22.6 percent on a YoY (year-on-year) basis during the first eight months of FY19 and was only $356 million in February 2019,” he said in a statement earlier this week.
“It is likely to narrow further on the back of a deceleration in imports of goods and services and robust workers’ remittances.”