KARACHI: Pakistani rupee on Tuesday maintained its downward streak against the US dollar, breaching yet another important threshold of 195 the interbank market to hit its weakest level.
In line with the prevailing trend over the last eight working days, the local currency closed at Rs195.74 against the greenback surpassing its last day's record low of Rs194.18, the State Bank of Pakistan (SBP) reported.
A persistent delay in the receipt of the next tranche of $1 billion from the International Monetary Fund (IMF) is mounting pressure on the rupee.
The situation is likely to remain uncertain for the local currency, AA Commodities Director Adnan Agar said while speaking to Geo.tv.
“If the government decides to remove subsidies on petroleum products, the rupee will bounce back,” he said, adding that the local unit will remain within the range of 180-185.
Agar, however, added that if the government decided to dissolve the assembly and move towards early election, the situation for the already tumbling currency market will deteriorate.
Regarding the IMF talks scheduled to begin tomorrow (May 18), the analyst said that if the government announces early polls, the IMF programme will be stalled or if the government decided to maintain the subsidy on petroleum products against the IMF conditions, the currency will slump further.
Agar maintained that even if the currency appreciates in the near run on the back of the decision taken by the coalition government, by the end of the fiscal year 2022-23 the rupee will slowly and gradually crawl back to the current levels because the widening current account deficit is one of the major issues of Pakistan.
Sharing similar views, other currency dealers said that the government’s reluctance to withdraw the subsidies as agreed with the IMF is worsening the situation.
Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 24.24% (or Rs38.2) compared to the previous fiscal year’s close at Rs157.54.
The rupee has maintained a downward trend for the last 13 months. It has lost 28.54% (or Rs43.47) to date, compared to the record high of Rs152.27 recorded in May 2021.
It is worth mentioning that since the PTI-led government was ousted through a vote of no-confidence on April 10, the dollar was valued at Rs182.93, and since then, the rupee had lost Rs12.8 or 7% of its value.
A day earlier, Prime Minister Shehbaz Sharif held an online meeting with Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan where he was informed that a trade deficit, delay in the tranche loan from the IMF, political instability, and excessive borrowing were reasons for the rupee depreciation.
"Importers are opening more Letters of Credit (LC) while exporters' inflows are low due to which demand in the interbank market has increased and supply has decreased," Bostan said in the online meeting with the premier.
"Exchange companies are not increasing the dollar rates and dollar rate in the free market cannot be reduced until the rate in the interbank market is reduced."