Rupee crosses 201 level vs dollar in interbank market

KARACHI: The rupee plunged past 201 per dollar in the interbank market on Tuesday, a record low for the 10th straight day, responding to the reports that Pakistan’s loan talks with the International Monetary Fund may not conclude within the established time frame, traders said.

With worries that the negotiations for the resumption of the IMF $6 billion Extended Fund Facility may be delayed amid indecisiveness of the government about removal of fuel and power subsidies and the lack of external financing could put pressure on the dwindling foreign exchange reserves, the local unit slumped. The rupee closed at 201.41 to the dollar, down 0.24 from the previous close of 200.93. In the open market, the rupee was trading at 202 versus the greenback.

“The uncertainty regarding the IMaF programme after the central bank’s acting governor Dr Murtaza Syed's statement that IMF talks may continue beyond May 25 for a few more days has added pressure to the already sinking rupee,” said a forex trader. With regards to negotiations with the IMF on seventh review, the acting governor told a virtual post monetary policy analyst briefing that the negotiations are underway and it will take some time as they are doing parallel -run on next year’s budgetary measures. However, analysts expect some closing remarks upon completion of recent IMF talks in Doha, even if talks did not conclude during the time frame.

Since the beginning of current fiscal year, the rupee has collectively dropped over 27 percent. The rupee has maintained a downward trend for the last 13 months. It has lost around 32 percent to date

Last week, the government had imposed a ban on the import of luxury and non-essential items. This decision was taken in the light of recent dollar slippage, rising current account deficit and decline in the country’s foreign exchange reserves.

The government said these measures would have a positive impact on the current account deficit and will help in controlling the slippage of the rupee against the dollar. However, analysts believe that these measures are insufficient and might lead to a further increase in smuggling via western borders.

The SBP also raised the policy rate by 150 basis points to 13.75 percent on Monday to combat soaring inflation and worsening outlook balance of payments.