- Currency closes at 188.66 after a day-on-day fall of 0.6%
- Lack of clarity on IMF programme and falling foreign exchange reserves weigh on market sentiment
Lack of clarity on foreign exchange inflow, and a stronger US dollar pushed Pakistan's rupee to its all-time low in the inter-bank market after a fourth successive session of losses on Tuesday.
As per the State Bank of Pakistan (SBP), the rupee closed at 188.66 after a day-on-day fall of Rs1.13, or 0.60%. On Monday, the rupee had closed at 187.53 after a depreciation of 0.48%.
The rupee's weakest closing prior to Tuesday was 188.18 on April 7, 2022.
Oil prices, a key determinant of currency parity, fell in volatile trade on Tuesday as the market balanced impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks.
However, despite the fall, the commodity remains well above $100 per barrel, a high level for oil-importing countries like Pakistan, which is already facing a widening current account deficit and depletion in foreign exchange reserves.
Pakistan's trade deficit has also widened 64.79% during the first 10 months (July-April) of the current fiscal year, amounting to a massive $39.3 billion compared to $23.8 billion during the same period of 2020-21. Imports increased 46.4% to $65.492 billion, while exports, up 25.5%, clocked in at $26.2 billion during the period.
A widening trade deficit has put pressure on the country's foreign exchange reserves as well, with the central-bank held level falling to below two months of import cover.
Pakistan is currently relying on inflow under its Extended Fund Facility (EFF) of the International Monetary Fund (IMF), hoping to convince the lender of releasing its next tranche to boost foreign currency reserves. At the same time, Islamabad is in talks with friendly countries, hoping for a loan-rollover from China as well.
“The main issue is the payments' pressure, which has added to woes of the already-struggling local currency,” Zafar Paracha, General Secretary at the Exchange Companies Association of Pakistan (ECAP), told Business Recorder.
“The IMF approval is also crucial for the country to grab funds from other international creditors."
He added that the currency is also likely to remain under pressure due to upcoming debt payments.
Inter-bank market rates for dollar on Tuesday
BID Rs 188.50
OFFER Rs 188.60
In the open market, the PKR lost one rupee for both buying and selling against USD, closing at 189 and 190, respectively.
Against Euro, the PKR lost 1.50 rupees for both buying and selling, closing at 198 and 200, respectively.
Against UAE Dirham, the PKR lost 10 paisas for both buying and selling, closing at 50.80 and 51.20, respectively.
Against Saudi Riyal, the PKR lost 30 paisas for both buying and selling, closing at 49.80 and 50.20, respectively.
Open-market rates for dollar on Tuesday
BID Rs 189
OFFER Rs 190