KARACHI: The Pakistani rupee deteriorated against the dollar on Tuesday as the country is facing depleting forex reserves, widening current account deficit and an increasing demand for the dollar by the importers, dealers said.
The rupee shed Rs1.90 to close at Rs184.44 to the dollar from the previous day’s closing of Rs182.54 in the interbank foreign exchange market.
The local unit took a dive amid rising demand for the greenback by the importers for the payment of commodities related to the holy month of Ramazan, while the talks with the International Monetary Fund (IMF) for the next tranche are also looking gloomy which kept the rupee under pressure, the dealers added.
The latest decline in the rupee came after the rupee was provided with some support last week by the State Bank of Pakistan’s unprecedented increase in the key policy rate coupled with other measures to curb the import bill of the country.
The central bank, on April 7, announced a significant increase in the key policy rate by 250 basis points to 12.25 per cent from 9.75 per cent in an emergency meeting of the Monetary Policy Committee.
The central bank also imposed 100 per cent cash margins on 177 items in a bid to curb their imports, which helped easing pressure on the rupee and reducing trade and the current account deficits.
The local currency hit the historic low of Rs188.18 on April 7, as the country faced the worst political crisis resulting in uncertain economic conditions.
The significant decline in the foreign exchange reserves of the country is also playing its role in denting rupee recovery against the greenback. Pakistan’s foreign exchange reserves hit a 22-month low after falling for nine consecutive weeks to $17.03 billion.
According to the data released by the SBP, the foreign exchange reserves of the country fell $449 million to $17.028 billion by the week ended April 8, 2022, compared with $17.477 billion a week ago.
The foreign exchange reserves were at $17.971 billion by the week ended June 26, 2020.
Pakistan’s foreign exchange reserves have declined $10.23 billion in the last seven months, owing to extreme pressure of the dollar demand for import payments and external repayments of government debt.
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 depreciation of the local currency.
The ballooning current account deficit is another reason for escalation in the dollar value. 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 payment.
The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs26.90 or 17.07 per cent from Rs157.54 to dollar on June 30, 2021 to the current level of Rs184.44.
At the open market, the buying and selling of the dollar was recorded at Rs183.5 and Rs185.2 at 3:15pm PST.