Monday July 04, 2022

Rupee makes another record low

By Our Correspondent
May 24, 2022

KARACHI: The rupee hit a fresh low against the dollar on Monday after the former Prime Minister Imran Khan announced the date of a march to Islamabad to demand early elections, deepening a political crisis at a time when the government is struggling to resume the IMF loan programme to aid its battered economy.

In the interbank market, the rupee dropped to 200.93 against the dollar, hitting yet another low for the 10th straight session. It weakened by 0.39 percent during the session. The local unit has depreciated by 18 rupees since the coalition government took office in April.

The rupee was trading at 201.80 versus the greenback in the open market. It was sold at 201 in the previous session. Traders said the rupee has already been under a severe pressure due to uncertainty about the revival of the IMF programme amid the lack of clarity on the government’s front to remove fuel and electricity subsidies.

However, Khan’s call for a march to the capital city of Islamabad on May 25 (Wednesday) resurfaced concerns about the political future of the country. “Investors are very much worried about the economic and political outlook of Pakistan, hurting sentiment on the rupee,” said a foreign exchange trader.

Finance Minister Miftah Ismail told Bloomberg that he is hopeful to sign an agreement with the IMF to secure the next loan tranche in the next two days. He said he will try to convince the IMF to offer financing without withdrawing subsidies on petrol prices. The loan talks between Pakistan and the Fund began in Doha last week.

Investors were also concerned about the country’s ability to meet its external obligations due to persistent decline in the foreign currency reserves. The yields on various maturities of Pakistan’s international bonds continued to increase sharply.

The country’s forex reserves continued to decline due to widening of the current account deficit and debt repayments. The reserves clocked in at $16.5 billion in April, compared with $17.4 billion in the previous month. The falling reserves and lack of financing from the IMF and other bilateral and multilateral creditors took a toll on the domestic currency.

However, a decline in the current account gap in April eased pressure on the depleting forex reserves. The deficit narrowed sharply to $623 million in April from $1 billion in March helped by healthy remittances and fall in imports.