Rupee hits all-time low of 202.83 per dollar

KARACHI: The rupee fell to a record low on Tuesday, weighed down by payments for imports, foreign debt, and dividend repatriation, traders and analysts said.

The rupee dropped 1.37 percent to 202.83 against the dollar at the close in the interbank market. It ended at 200.06 on Monday. The currency hit a previous record low of 202.1 on May 26.

“We saw strong demand from oil importers and from the foreign companies to repatriate profits and dividends to their headquarters in various countries,” said a currency trader. 

The large external debt payments owing to erosion in the foreign exchange reserves amid a lack of foreign assistance exerted pressure on the local unit. Pakistan has been waiting for the International Monetary Fund’s executive board to complete the seventh review to revive a $6 billion financial support package agreed upon in 2019 after Islamabad and the Fund concluded discussions in Doha last month. 

The IMF’s approval is expected to pave the way for other multilateral funding also such as the World Bank, Asian Development Bank, etc., including China and Saudi Arabia.

"Rupee is taking a beating on negative sentiments amidst lack of forex liquidity & mounting pressure of external payments. Pakistan also has to make June related principal & interest repayments,” said Komal Mansoor, the head of research at Tresmark.

“Exporters are holding on to their proceeds, there's demand in the open market due to Haj and banks' nostros are significantly short of dollars," Mansoor added. The currency depreciated by 2.50 versus the greenback in the open market. It was sold at 203.50, compared with 201 in the previous session.

The month-on-month decline of 23 percent in the Roshan Digital Account in May affected sentiment, with traders assuming that there was some funds outflow from the Naya Pakistan Certificates. This grew concerns about the country’s external position. RDA inflows stood at $189 million in May, compared with $245 million in the previous month.

The foreign currency reserves of the central bank declined to $9.7 billion during the week ending May 27 — less than to cover 45 days of imports.

The widening of the current account deficit, falling foreign currency reserves and political instability, and the strengthening of the US dollar have seen the rupee slump this year. The local unit has weakened by 28.47 percent so far this fiscal year.

The country’s trade deficit surged 58 percent to $43.3 billion in July-May FY2022 weighed by a hefty import bill amid a record spike in global commodity prices and robust aggregate demand.

The real effective exchange rate (REER) depreciated 0.84 percent to 95.85 in April, the State Bank of Pakistan reported. It stood at 96.66 in March. The REER fell by 3.93 percent since July 2021. Analysts expect the rupee is fairly valued in terms of REER. The direction of the rupee will depend on global oil prices and progress on IMF loan tranche.