KARACHI: The rupee recovered 91 paisas against the dollar on Tuesday after the political uncertainty in the country ended with the formation of the new government coupled with a sharp hike in the key policy rate, dealers said.
The exchange rate ended at Rs182.02 against the greenback from the last day’s closing of Rs182.93 in the interbank foreign exchange market.
The local unit showed significant recovery, amid a sharp increase in the policy rate to curb the demand and the clarity on the domestic political landscape, the dealers added.
On April 7, 2022, the central bank, in a surprise move, announced a massive increase of 250 basis points to 12.25 per cent from the previous 9.75 per cent in the key policy rate.
The announcement came in an emergency meeting of the Monetary Policy Committee (MPC), where the State Bank of Pakistan (SBP) said that the rupee depreciated around 5 per cent against the dollar since the last policy announcement.
The local currency hit the historic low of Rs188.18 on April 7, 2022, as the country faced the worst political crisis, resulting in uncertain economic conditions.
The slump in the value of the rupee was due to a significant decline in the foreign exchange reserves of the country.
The foreign exchange reserves declined around 36 per cent during the last seven months. The country’s foreign exchange reserves hit an all-time high of $27.23 billion on August 27, 2021 and fell to $17.47 billion by the week ended April 1, 2022.
The ever-widening current account deficit, volatile global commodity prices after Russia, one of the biggest oil and gas producer countries, went on a war with Ukraine, which also played its part in the rupee depreciation.
The ballooning current account deficit is another reason for escalation in the value of the dollar. Pakistan’s current account deficit ballooned to $12 billion during the first eight months (July-February) 2021/22 against a surplus of $994 million in the corresponding months of the last fiscal year.
Although the current account deficit narrowed to $545 million in February 2022, compared with the deficit of $2.53 billion in January 2022, the scheduled external repayments are still a threat to the balance of payments position.
The local currency remained under pressure since the start of the current fiscal year, as it lost Rs24.48, or 15.53 per cent, to the current level of Rs182.02 against Rs157.54 to a dollar on June 30, 2021.
At the open market, the buying and selling of the dollar was recorded at Rs183.50 and Rs185.50 at 4:00pm PST.
