Rupee hits 3.5 month low

KARACHI: The rupee fell to its lowest level in three-and-a-half months on Monday because of higher import payments, while the expected delay in the sixth review of the International Monetary Fund’s $6 billion loan programme also weighed on the local unit.

In the interbank market, the rupee dropped 0.39 percent or 62 paisas to close at 157.51 per dollar, its weakest since March 2, 2021. It ended at 156.89 on Friday.

Rupee has depreciated by 1.92 percent so far this month but it has appreciated 1.53 percent against the dollar year-to-date. It lost 70 paisas to close at 158 against the dollar in the open market trade.

Domestic currency has been under pressure due to higher appetite for greenback from the importers and corporates, increased international oil prices, year-end reserve building by the central bank, and foreign debt payments.

However, Monday’s fall came after the media reported a likely delay in the release of the next tranche under the extended fund facility, as Pakistani authorities and the IMF failed to break the deadlock in talks.

Islamabad is in talks with the IMF as part of the sixth review of a 39-month bailout programme, which began in 2019.

Finance Minister Shaukat Tarin last week said the revenue target was an important point and the IMF and the government debated ways to achieve the target.

However, as per latest reports, both sides have decided to put completion of the sixth review of the EFF on hold till September.

The IMF’s resident chief has said the Fund is looking forward to our continued discussions with the Pakistani authorities on the set of policies and reforms that could form the basis for the completion of the 6th review under the Extended Fund Facility (EFF).

“The rupee has depreciated on expected lines. We are now looking at 158 level this week, which if broken can pave the way for 159,” said a foreign exchange trader at a leading commercial bank.

“Increased demand under the Temporary Economic Refinance Facility (TERF) and the expected foreign repayments of $430 million in the last week of this month are weighing on the rupee.

Inflows have been limited so far,” the trader added. Corporates have availed the concessionary refinance facility for import of plants and equipment. The delay in the IMF’s review could result in delaying committed disbursements from other international financial institutions such as the World Bank and the Asian Development Bank to Pakistan. Traders are monitoring the outcome of the Financial Action Task Force’s meeting being held to decide whether Pakistan would be removed from the global watch dog’s grey list.