KARACHI: The Pakistani rupee shed 14 paisas to slide to an all-time low of Rs200.14 on Friday as the outcome of the government’s dialogue with the International Monetary Fund (IMF) remains uncertain.
The local unit fell 14 paisas to close at Rs200.14 to the dollar from Thursday’s closing of Rs200 in the interbank foreign exchange market. The rupee recorded the previous historic low of Rs200 on May 19, 2022.
The dealers said that the latest escalation in the prices of the dollar was due to depleting foreign exchange reserves, surging current account deficit coupled with the political turmoil which dented the investors’ confidence.
The negotiation between the government and IMF has resumed for the revival of the Extended Fund Facility (EFF), however, the traders expect the talks to stall as the government decided to maintain the subsidies on the prices of fuel and power, contrary to the prerequisite conditions of the IMF.
With uncertain sentiments prevailing in the market, panic buying of the dollar was witnessed in the market, where the traders expect the local currency to depreciate further if the government fails to strike a deal with the IMF.
The resumption of the IMF programme is essential to boost the confidence of investors and other multinational lenders, however a positive outcome is unlikely due to the government’s decision to maintain subsidies on fuel and electricity price.
Additionally, a surging demand for the foreign currency was witnessed in the market for import and external payments, which also played a vital role in the depreciation of the local unit, the dealers added.
The country received record remittance of $3.1 billion during the month of April, however, the reducing forex reserves pose a significant threat to the stability in the value of rupee.
The foreign exchange reserves held by the State Bank of Pakistan (SBP) were down $145 million to $10.16 billion on a weekly basis, compared with $10.30 billion on May 6, according to data released by the central bank.
The overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $16.16 billion, while the net reserves held by banks amounted to $5.99 billion.
The widening current account deficit is another vital factor in the escalation of the dollar value. Pakistan’s trade deficit showed a sharp growth to $3.64 billion in March 2022, registering an increase of 12 per cent over the same month of the last fiscal.
The total trade deficit escalated to $35.52 billion in the first nine months (July-March) period of the current fiscal year against $20.8 billion in the same period last fiscal year.
The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs42.60 or 27.04 per cent from Rs157.54 to dollar on June 30, 2021 to the current level of Rs200.14.
At the open market, the buying and selling of the dollar was recorded at Rs200.5 and Rs202 at 5:30pm PST.