Pakistan's currency continued to lose ground as the rupee closed at 169.12 against the dollar in the inter-bank market, registering yet another low on Wednesday.
As per the State Bank of Pakistan (SBP), the currency closed at 169.12 against the dollar in the inter-bank market on Wednesday, a decline of Rs0.18 or 0.11%. On Tuesday, the PKR registered its then-lowest level of 168.94.
The PKR has lost nearly 10% since May 2021.
“Rising import bill and resultantly, a current account deficit is putting pressure on the Pakistani rupee,” Mohammed Sohail, CEO at Topline Securities, told Business Recorder.
Pakistan’s trade deficit has widened 120% to $7.5 billion during the July-August period of the fiscal year 2021-22, showed external trade figures released by the Pakistan Bureau of Statistics (PBS). The deficit was $4.1 billion or 120% more than the comparative period of the previous fiscal year.
The government needs to tighten the fiscal and monetary stance to control the current account deficit, added Sohail.
The State Bank of Pakistan (SBP) Monetary Policy Committee is scheduled to meet on Monday, September 20, 2021, and will announce the policy rate for the next two months.
Pakistan's rupee closes at its lowest level against the US dollar as pressure remains
The central bank has maintained the policy rate unchanged since June 2020 at 7%. Back then, the central bank MPC noted that the priority of monetary policy has shifted toward supporting growth and employment amid a slowdown in the domestic economy.
Meanwhile, the turmoil in neighbouring Afghanistan has also exacerbated the economic situation in Pakistan, as Afghanistan-related USD demand also has “some impact on rates in the kerb market,” said Sohail.
On a query regarding whether the government should float dollars in the market to control the exchange rate, Sohail replied that it is better to sell off dollar bonds after the IMF agreement to get a "good price".
The IMF delegation is scheduled to meet Pakistani authorities for the sixth and seventh reviews this month.