Rupee races to 300, closes at new low of 298.93 per dollar in interbank market

KARACHI: The rupee tumbled to a record low as the cash-strapped nation continues to grapple with the political turmoil which threatens to spiral into a fullblown crisis. 

In the interbank market, the local unit plunged Rs8.71, or 3%, against the US dollar on Thursday closing at 298.93 in the interbank market.

The new rate is nearly Re1 away from the much-anticipated rate of Rs300 per dollar.

The rupee depreciation has piled up foreign debt without taking new external loans, making imports further expensive for Pakistan, which faced a six-decade high inflation reading at 36.4% in April 2023.

Financial pundits believe that the rupee has been depreciating due to political and social unrest caused after the arrest of Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan.

Moreover, the dollar demand supply gap has also widened as the exporters have stopped selling US currency on speculations that rupee would depreciated further versus the greenback. On the other hand, importers are seen rushing to buy dollars.

This gap in the demand and supply of the foreign currency in the interbank market have contributed to the rupee’s devaluation.

Political situation would improve in a day or two and help the currency stabilise around the current levels or partially recover ground against the greenback.

“Pressure had built up after a few months of stability,” Saleem Amjad, chief executive officer at Link International Exchange Company, told Bloomberg.

“Sentiment turned sour given the political turmoil, the prospect of another delay in the IMF loan and a drop in remittances.”

Dr Khaqan Najeeb, former finance ministry adviser, said that continuing political instability has taken a toll on market sentiment pushing the Pakistani rupee to hit a record low.

“The heightened political turmoil has come at a time when the economy has been in the doldrums for months largely due to an acute balance of payment crisis, with falling State Bank of Pakistan reserves barely covering a month of highly controlled imports,” he commented a day earlier.