- Stalemate between Pakistan and IMF largely driving the value of rupee lower
- Pakistan has to take harsh steps to appease the lender, analysts say
The local currency continued its slide for the 13th consecutive session on Monday and slipped to 200.93, down 0.39%, against the US dollar in the inter-bank market.
The rupee breached the 201 per dollar mark once again in intra-day trading but managed to regain some ground by close.
Last week on Friday, the currency had fallen 0.07% to close at 200.14, with exchange companies reporting surplus availability of dollars and low demand in the open market. They are diverting the dollars to the inter-bank market, where demand is higher.
The stalemate between Pakistan and the International Monetary Fund (IMF) is largely driving the value of rupee lower. A positive development on this front is forecasted to reverse the sentiment in the foreign exchange market and aid the currency's marginal recovery.
But the continuation of the fuel subsidy by the government is not only draining finances and mounting pressure on the rupee but also acting as the largest obstruction in the way of revival of the IMF’s $6 billion Extended Fund Facility.
Marker analysts told Business Recorder that speculations surrounding the revival of the IMF bailout were shattering sentiment in the foreign exchange market and driving the value of rupee lower.
“Pakistan has to take harsh steps to appease the global lender,” they said. “Rupee deprecation despite robust current account data reflects that the local currency’s fall is no longer import-driven.”
According to them, banks were primary speculators of the currency.
Meanwhile, although the current account number for the month of April was far better than market expectations, it failed to trigger appreciation of the local currency.
In addition, a persistent decline in State Bank of Pakistan’s foreign currency reserves, which fell to 1.5 months of import cover last week, also struck the local currency and restrained it from posting gains against the greenback.
A report from JS Global said SBP reserves provided an import cover near to 1.5 months whereas the liquidity position depicted nearly $20 billion worth of short term foreign currency drained over the next 10 months. This has kept rupee under pressure, leading it to cross 200 against the US dollar.
Inter-bank market rates for dollar on Monday
BID Rs 200.20
OFFER Rs 200.40
In the open market, the PKR lost 1.30 rupees for buying and 80 paisas for selling against USD, closing at 200.80 and 201.80, respectively.
Against Euro, the PKR lost one rupee for both buying and selling, closing at 211 and 213, respectively.
Against UAE Dirham, the PKR remained unchanged for both buying and selling, closing at 54.70 and 55.20, respectively.
Against Saudi Riyal, the PKR remained unchanged for buying while gaining 10 paisas selling, closing at 53 and 53.40, respectively.
Open-market rates for dollar on Monday
BID Rs 200.80
OFFER Rs 201.80