KARACHI: The rupee slumped on Friday to mark the sixth straight session of record lows, breaching the 228-per-dollar mark.
The rupee closed at 228.37 to the dollar, hitting a fresh record low in the interbank market. It ended at 226.81 on Thursday. The local unit depreciated by 1.56 rupees or 0.68 percent.
The currency lost two rupees to finish at 230 against the greenback in the open market.
The already battered rupee felt the heat after the foreign exchange reserves held with the central bank fell by 4 percent to $9.329 billion as of July 15—still enough to cover less than two months’ imports.
The reserves have been dwindling on the back of higher current account deficits amid higher growth in imports. The increasing foreign debt repayments with drying dollar inflows worsen reserves’ position.
The rupee has been under severe pressure from the falling reserves, despite last week’s staff level agreement reached with the International Monetary Fund that would pave the way for a disbursement of $1.17 billion under resumed payments of a bailout package.
The growing panic in the financial markets coming from increasing risks after Pakistan-Tehreek-e-Insaf’s by-poll win added to worries over the country’s bailout deal, which it requires to evade a default.
The rupee plunged by 8.39 percent against the dollar in the last six sessions.
The central bank tried to soothe nerves of the market saying Pakistan’s situation was different from Sri Lanka's and ruling out the country’s default risk. It said it was intervening cautiously to avert disorderly moves of the rupee, but with declining reserves as low as $9.8 billion, it can’t intervene frequently.
The government is seeking an urgent IMF board meeting to approve Pakistan’s request for a bailout package due to its worsening balance of payments position, according to reports.
However, an early meeting is not possible as the country hasn’t yet met all prior actions that the Washington-based lender has asked for calling the board meeting.
The IMF is seeking assurance on Saudi Arabia’s commitment to financing Pakistan before the multilateral lender disburses fresh funds to the country.
The IMF wants to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad doesn’t have a funding gap after the IMF loan.
Fitch Ratings revised its outlook for Pakistan’s sovereign debt from stable to negative, but it affirmed the Long-Term Foreign-Currency (LTFC) and Issuer Default Rating (IDR) at “B-“. However, the rating announcement weighed on the sentiment of the rupee.