KARACHI: Rupee hit yet another record low versus dollar on Thursday amid fears of further depreciation as Pakistani and International Monetary Fund (IMF) officials were yet to give any timeline for the resumption of $6 billion loan facility despite claims the talks were moving forward positively.
The rupee dropped to a new life-low of 174.10 in intra-day trading against the dollar before closing at 173.96, compared with the previous close of 173.47. In the open market, it was sold at 174.20, foreign exchange dealers said.
"The entire week, rupee has been in a free fall. First, due to reports that IMF talks have failed and now, on speculation the IMF has given a target for rupee parity,” said Eman Khan, an analyst at Tresmark.
“Though this seems unlikely, a conspicuous lack of effort by the central bank to intervene, either verbally or by supply, gives some pause for thought. Either way, this is turning out to be an ugly economic situation with multidimensional fallouts."
The government said it was moving closer to strike a staff-level agreement with the IMF by developing a consensus on the Memorandum of Economic and Financial Policies (MEFP).
The Adviser to the Prime Minister on Finance Shaukat Tarin, who is making all-out efforts to complete the negotiations on the sixth review under the EFF, hoped the talks between the IMF and Islamabad would be concluded very soon.
Rupee has depreciated by 14.23 percent since its peak reached in May 2021.
Analysts see no fresh reasons behind the repeated devaluations of the rupee.
They said the rupee’s slide stemmed from a big mismatch between the demand and supply of the greenback and the bleak outlook for the country’s economy.
“Outflows in the form of imports exceed inflows from exports and remittances,” said Samiullah Tariq, the head of research at Pak-Kuwait Investment Company.
The rupee has been facing a continual slide from the surging current account deficit as a result of higher imports. The skyrocketing global commodity prices, especially crude oil added to the fire. The flight of dollars from Pakistan to Afghanistan since the Taliban takeover also put pressure on the supply side.
The current account deficit clocked in at $1.11 billion in September versus a deficit of $1.47 billion in the previous month, taking the overall deficit to $3.4 billion in the first quarter of this fiscal year from $2.5 billion a year ago.
Analysts expect the current account gap to widen to $10-11 billion or 3-3.5 percent of GDP in FY2022. This is because of the expected hefty import bill of $65 billion, while remittances are projected to be at $29-30 billion.
“We now expect rupee/dollar to be between 175 and 178 by June 2022. Rupee may find some support as imports may eventually slow down on the back of: recent deprecation of rupee amidst a market-driven exchange rate regime, resumption of IMF programme, and expected monetary and fiscal tightening,” said Syed Atif Zafar, the director of Research at Topline Securities in a report on Wednesday.