- Lack of clarity on revival of IMF programme, economic policy continues to push currency lower
The local currency plunged further on Friday as the rupee closed at Rs192.53 after a seventh-successive fall in the inter-bank market. The rupee traded close to 193 during the day, but robust remittances helped it stage a minor recovery.
Monthly remittances from overseas workers crossed $3 billion for the first time in Pakistan's history, as inflows of $3.125 billion were recorded during April 2022.
Meanwhile, rupee's fall comes on the back of speculation in the foreign exchange market and panic over Pakistan's trade and current account deficits. Additionally, uncertainty regarding resumption of the International Monetary Fund (IMF) bailout programme has continued to pile on the pressure.
As per the State Bank of Pakistan (SBP), the rupee closed at its all-time low of 192.53 after a day-on-day fall of Rs0.76, or 0.39%.
On Thursday, the rupee had closed at the then all-time low of 191.77 after a day-on-day fall of Rs1.75, or 0.91%.
The currency fared no better in the open market and closed at 194.4 with dealers citing a clear shortage of dollars, attributing it to a lack of greenback sellers.
The SBP-held reserves also retreated $190 million to $10.31 billion on Thursday, with the level staying at less than 1.5 months of import cover.
Market experts attribute the rupee's fall to speculation in the foreign exchange market ahead of a meeting between Pakistan’s economic managers and IMF leadership.
Arif Habib Limited (AHL) Head of Research Tahir Abbas stated that lack of news regarding the resumption of the IMF programme was fuelling the fall. However, he noted that optimistic remittances figures improved market sentiment and resulted in a marginal recovery.
“Government has not taken any decision to appease the global lender and subsidy on petroleum and energy prices continues unabated,” he stressed. “Import pressure is building up on the country hence, the rupee is declining against the US dollar.”
In particular, he noted that the oil import bill has been swelling to unsustainable levels. Abbas pointed out that petroleum spreads in the international market were widening and import bill was expected to spike further. "Hence, it is vital for the government to end the fuel subsidy."
He stressed upon the government to take a decision regarding fuel price subsidy and projected that the rupee would stabilise only after the IMF resumes its loan programme.
Inter-bank market rates for dollar on Friday
BID Rs 192.40
OFFER Rs 192.60
In the open market, the PKR lost 1.40 rupees for buying and 1.70 rupees for selling against USD, closing at 193.40 and 194.70, respectively.
Against Euro, the PKR lost 2 rupees for both buying and selling, closing at 202 and 204, respectively.
Against UAE Dirham, the PKR lost 60 paisas for buying and 50 paisas for selling, closing at 52.60 and 53, respectively.
Against Saudi Riyal, the PKR lost 50 paisas for both buying and selling, closing at 51.20 and 51.70, respectively.
Open-market rates for dollar on Friday
BID Rs 193.40
OFFER Rs 194.70