- Reports suggest pressure due to oil payments reason for latest decline
The rupee weakened further in the inter-bank market, as the local currency registered a decline of 1.07%, to close over the 200 level against the US dollar on Monday.
As per the State Bank of Pakistan (SBP), the currency closed at 200.06 after a day-on-day depreciation of Rs2.14, or 1.07% on Monday. On Friday, the currency had ended at 197.92 against the US dollar in the inter-bank market.
Last week, the rupee registered a 0.5% gain as the government’s move to start removing energy subsidies gave the currency market hope of the International Monetary Fund (IMF) programme revival.
The Pakistani currency appreciated in four out of the five sessions with the only decrease coming on Friday after Moody’s downgraded the outlook on Pakistan from stable to negative a day earlier.
While it maintained a B3 local and foreign currency issuer and senior unsecured debt ratings, Moody’s warned that Pakistan’s current account deficit will remain under significant pressure on elevated global commodity prices through 2022-2023.
The current account deficit, largely due to a mounting import bill, is key to rupee value that has depreciated massively in the last 12 months.
“The ongoing demand and supply pressure in the market has led to the decline in rupee value,” said Tahir Abbas, Head of Research at Arif Habib Limited (AHL). “There must be an import or debt repayment in the process, which has led to pressure in the market,” he said.
Facing a bulging import bill, Pakistan’s trade deficit widened by 57.85% during the first 11 months (July-May) of the outgoing fiscal year 2021-22, and reached $43.334 billion compared to $27.452 billion during the same period of 2020-21, according to data shared by the Pakistan Bureau of Statistics (PBS).
“A number of banks have informed us that due to oil payments, there is a high demand for dollars,” said Zafar Paracha, General Secretary at the Exchange Companies Association of Pakistan.
The currency dealer informed that the ongoing volatility does not give a good message, as the country is already facing an emergency situation.
"Till date, we have not seen the government taking serious measures to address the economic issues,” said Paracha, while adding that uncertainty pertaining to negotiations with the IMF remains.
Inter-bank market rates for dollar on Monday
BID Rs 200.30
OFFER Rs 200.50
In the open market, the PKR lost 2.50 rupees for both buying and selling against USD, closing at 199.50 and 201, respectively.
Against Euro, the PKR lost 2.50 rupees for both buying and selling, closing at 212.50 and 214.50, respectively.
Against UAE Dirham, the PKR lost 1.10 rupees for both buying and selling, closing at 54.80 and 55.30, respectively.
Against Saudi Riyal, the PKR lost 1.10 rupees for buying and 1.20 rupees for selling, closing at 53.20 and 53.70, respectively.
Open-market rates for dollar on Monday
BID Rs 199.50
OFFER Rs 201