- The PKR has depreciated 16.5% against the US dollar since December 31, 2021
Pakistani Rupee has been Asia's worst-performing currency in 2022 with a fall of nearly 16.5% against the US Dollar that put it at the bottom of a basket of 13 peers, including the Japanese Yen, South Korean Won, and Bangladesh Taka.
The rupee has declined 5.1% since June 8 alone as the prolonged delay in reviving the International Monetary Fund (IMF) bailout programme and plummeting foreign exchange reserves take a toll on the nation's economy that also saw the government change hands mid-way during the first half of the year.
On Tuesday, the rupee closed at 211.48 in the inter-bank market, a far cry from where it was on December 31, 2021 when it settled at 176.51.
The Pakistani currency was closely followed by the yen (15% decrease), won (8.1%) and the taka (7.22%), data compiled by Business Recorder showed. Asia's best – currencies that lost the least value against the USD – were the Hong Kong Dollar, Singapore Dollar, and the Indonesian Rupiah.
The erosion in rupee's value comes as Pakistan battles a widening current account deficit, coupled with the central bank-held reserves hitting their lowest level since November 2019, and a persistent delay in reviving the IMF programme that was put on hold due to the change in government.
While the new coalition partners moved to hold talks with the Washington-based lender last month, the IMF mission concluded its talks with Pakistan authorities without a word on reviving the stalled Extended Fund Facility (EFF).
Instead, in its statement, the IMF said deviations from the policies agreed in the last review require urgency of concrete policy actions, including in the context of removing fuel and energy subsidies and the FY2023 budget, to achieve programme objectives.
Since then, Pakistan has started a tough economic path, hiking fuel prices thrice in less than three weeks and removing subsidies on power tariffs, amid escalating fears of inflation and slower economic growth. At the same time, rising oil prices in the international market have piled on the pressure, triggering a series of measures including by the State Bank of Pakistan that decided to relax Cash Reserve Ratio requirements against FE-25 deposits for some banks due to rising demand for the US dollar in the inter-bank market.
On Monday, Finance Minister Miftah Ismail also moved to pacify the markets, expressing his hope that the IMF programme would be revived in a day or two. His statement, along with other rumours over the bailout-revival, propped up the country's stock exchange with the KSE-100 Index posting a 1.8% increase on Tuesday. However, the rupee still declined, posting its eight successive loss against the US dollar.
The IMF programme is seen as a critical one for Pakistan as many believe that this would open doors to other sources of lending and shore up dwindling foreign exchange reserves that have fallen over 50% in the last 10 months.