Headache for economic managers continued as Pakistan's rupee depreciated 0.93% to a record low against the US dollar in the inter-bank market, closing at 172.78 on Monday.
Uncertainty over Pakistan’s negotiations with the International Monetary Fund (IMF) and pressure due to heavy import payments pushed the currency to its lowest level in history against the US dollar on the opening day of the week.
As per the State Bank of Pakistan (SBP), the PKR closed at 172.78 against the USD, a day-on-day depreciation of Rs1.59 or 0.93%. On Thursday last week, the PKR had dropped to the-then record low of 171.20.
The PKR has lost about 12% of its value against the greenback since its recent high in May, fanning concerns over the pace of inflation. With petrol prices having increased over 8% on the weekend, economic managers have been left scrambling as they look to tame rising prices with added pressure coming from the commodity side.
“The latest drop in the PKR value against the US dollar is primarily attributed to the ongoing ambiguity pertaining to Pakistan's negotiations with the IMF,” said Tahir Abbas, Head of Research at Arif Habib Limited.
Abbas said the market does not like uncertainty, which has led to increase in pressure on the local currency.
Pakistan-IMF talks have not failed, says Tarin
The statement comes after a spokesperson of the Ministry of Finance also refuted media reports about failure of the talks with IMF and clarified that they would resume today (Monday) uninterrupted.
"There is no truth in the news of the failure of talks with the IMF. The talks will resume on Monday uninterrupted from where they were on Friday," a Finance Ministry spokesman said in a statement on Sunday.
The spokesman further stated that there is no deadline for the talks to end, adding that the dialogue with the IMF would continue till "success". He further stated that the team is still in Washington for the talks.
Additionally, Advisor to PM on Finance and Revenue, Shaukar Tarin, also looked to dispel the impression of failure of talks with the IMF, saying that they are still ongoing.
Pakistan's rupee breaks four-day losing streak against US dollar
Meanwhile, Abbas remained optimistic that stability would soon return amid “clarity from the IMF”.
He added that the PKR-USD parity depends on several factors including the current account position, amount of foreign exchange reserves, import, and export figures.
Earlier, State Bank of Pakistan (SBP) Governor Dr Reza Baqir had also said that the ongoing trend is a reflection of market dynamics.
Dr Baqir said that the conversion to a market-based regime allows maintaining the current account deficit (CAD) at a sustainable level. “The CAD will not increase as it did in the past because the exchange rate was not adjusted which led to an increase in imports and current account deficit,” he said.
IMF validating data, negotiations moving in right direction: Tarin
Meanwhile, market experts have expressed concerns regarding IMF conditions for the release of the next tranche.
Inter-bank market rates for dollar on Monday
BID Rs 172.80
OFFER Rs. 172.90
Open-market movement
In the open market, the PKR lost 1.20 rupees for buying and 1.70 rupees for selling against USD, closing at 172.70 and 173.50, respectively.
Against Euro, the PKR lost one rupee for buying and 1.50 rupees for selling, closing at 198.50 and 200.50, respectively.
Against UAE Dirham, the PKR lost 90 paisas for buying and 1.10 rupees for selling, closing at 49 and 49.40, respectively.
Against Saudi Riyal, the PKR lost 20 paisas for both buying and selling, closing at 45.70 and 45.90, respectively.
Open-market rates for dollar on Monday
BID Rs 172.70
OFFER Rs 173.50