close
Advertisement
Can't connect right now! retry

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

add The News to homescreen

tap to bring up your browser menu and select 'Add to homescreen' to pin the The News web app

Got it!

Free fall for rupee: Dollar soars by Rs9.37

Top Story

October 10, 2018

KARACHI/ISLAMABAD: Rupee on Tuesday plunged around 8 per cent (Rs9.37) in the interbank, while the trade at the open market remained almost lull amidst concerns that authorities may be powerless to defend the currency ahead of a planned bailout talks with the International Monetary Fund (IMF).

Meanwhile, the foreign debt increased by Rs902 billion amid the record decrease in foreign exchange reserves. It also affected the gold price, the rate for one tola reached Rs62,000 after an increase of Rs1,700. However, things improved in the stock market on Tuesday.

The State Bank of Pakistan (SBP) said the exchange rate in the interbank market closed at Rs133.64 to the US dollar against the previous day’s closing of Rs124.27. “This movement broadly reflects the current account dynamics and also the demand-supply gap in the foreign exchange market,” the SBP said.

“SBP will continue to closely monitor the situation and stand ready to intervene in case of any unwarranted volatility in the foreign exchange market.” The latest has been the fifth currency depreciation since December 2017, bringing the rupee value down a cumulative 26 per cent.

The SBP said the adjustment in the exchange rate along with lagged impact of recent hikes in the policy rate, and other policy measures to contain imports “would correct the imbalances in the external account”.

“Although, current account deficit narrowed in August 2018, a consistent increase in oil import bill on account of rising international oil prices has exerted pressure in the foreign exchange market,” it added.

In the open market, the rupee extended losses, touching the 138-level amid heavy dollar buying. The Exchange Companies Association of Pakistan, however, quoted the rupee closing at 134.50, 4.66 per cent weaker from the previous day.

A currency trader said the markets were awaiting the government’s decision about the International Monetary Fund (IMF) programme.

“Investors started pricing in at least 5 per cent depreciation in the exchange rate right after the government announced its plans to seek a bailout from the IMF to overhaul its ailing economy on Monday night,” the trader said. “More importantly, the SBP didn’t intervene in the market to rescue the falling rupee.”

The SBP kept the rupee at 124.20/25 since late July 2018. Earlier, Finance Minister Asad Umar said Prime Minister Imran Khan approved the start of programme discussions with the IMF. Asad was currently leading a Pakistani delegation to the IMF/World Bank meetings in Bali. They will hold talks with the Fund officials this week.

All the analysts agreed that seeking financial support from the Fund would require much more depreciation than the Tuesday’s move. The SBP is likely to go to more market-oriented exchange rate mechanism, they said.

“This (latest) has been the biggest drop of 2018 in five rounds of depreciation this year,” Eman Khan from Tresmark, an application that tracks financial markets, said. “Historically, whenever Pakistan has opted for IMF programs (10 since 1990) rupee has depreciated by roughly 10 percent each time during the loan tenure so we can still expect some more action till the actual program announcement.”

Standard Chartered Bank said although the government appears to agree with IMF prescriptions for a weaker rupee and tighter monetary and fiscal policy, IMF program negotiations may not be straightforward.

“In our view, securing US approval on the IMF Executive Board will require Pakistan to strike a fine geopolitical balance between the (US President Donald) Trump administration’s concerns over China’s growing economic engagement in Pakistan and the country’s bilateral commitments under CPEC (China-Pakistan Economic Corridor),” the foreign bank said in a report.

The currency devaluation is triggering more imported inflation, especially in the context of increasing oil prices and rising external debt repayments’ fears, despite increase in exports.

Meanwhile, the government has decided to take the people and parliament into confidence about the economic situation, for which facts and figures would be shared and the ensuing challenges highlighted in the upcoming session of the National Assembly slated for October 29.

Informed sources told The News that a high-level meeting was held on Tuesday, with

Prime Minister Imran Khan in the chair, to discuss economic situation and a crisis-like scenario. It was attended by the ministers concerned and economic experts.

It has been decided that people would also be briefed on the ill-planning of the previous governments and ill-conceived economic policies which resulted in the bad shape of the economy, the sources said.

Imran will also take up questions about the economy of the country at every available forum as he was not satisfied about the performance of the media team that is dealing with the subject, the sources added.

The prime minister said challenges faced by the current government was much more serious than the predecessors and that’s why they were forced to take tough decisions. On the other hand, Information Minister Fawad Chaudhry said the PTI government did not want to approach the IMF but had to take the difficult decision because of the prevailing situation.

"Approaching the IMF was not part of our policy, but we have to make difficult decisions to run the economy," Fawad said at an event in Islamabad. "We are also in talks with other countries," he said, adding that the foreign exchange reserves could run the country only for 46 days and there was no money for salaries.

"We need $8 billion to pay back our loans and $28 billion to run the country," the information minister said.

Fawad said, "We need to strengthen the country to stand on its own feet, the nation is already under a lot of pressure.

"It is not our fault that the country is facing inflation," he continued while adding that "good times are ahead". "Nations are made after going through difficulties." Stating that the previous governments "drowned the country in debt", Fawad alleged, "They used the nation's money on unnecessary things or for their own profit.

"If people pay for their medical treatments abroad through the nation's tax returns, then what will become of the country?" he questioned. Asserting that the process of accountability will continue regardless of objections, Fawad said, "Noise is made when you ask people to bring back laundered money. Cry all you want, the process of accountability will not stop."

"Pakistan cannot be run by pleasing everyone," he added. "Institutions exploit overseas Pakistanis as soon as they set foot in the court, so why would they come here?" he asked. The information minister said there were allegations against ministers of the previous PML-N government and said, "Sheikh Rashid has told us that former railways minister Saad Rafique inducted 8,000 people from his constituency in the railways. Obviously, he will win the election like this." Speaking about PML-N's requisition to call a National Assembly session over Shahbaz Sharif's arrest, the information minister said, "We will call a session if the opposition submits a requisition with 90 signatures." Meanwhile, Minister for Ports and Shipping Ali Zaidi said they had heard about the dollar price reaching Rs140, but added that the people would see good times in the future.

Topstory minus plus

Opinion minus plus

Newspost minus plus

Editorial minus plus

National minus plus

World minus plus

Sports minus plus

Business minus plus

Karachi minus plus

Lahore minus plus

Islamabad minus plus

Peshawar minus plus