Rupee falls for ninth straight day; dollar hits Rs211.93

Rupee falls for ninth straight day; dollar hits Rs211.93

Shahnawaz Akhter
June 22, 2022

Rupee falls for ninth straight day; dollar hits Rs211.93

Rupee weakens for the straight ninth day.
The market was expecting Rupee to get stronger.
The current account deficit skyrocketed to $13.78 billion

KARACHI: The rupee fell for the ninth straight day against the dollar on Wednesday, as the foreign currency reached another high of Rs211.93 in the interbank market, dealers said.

The exchange rate recorded a decline of 45 paisas to end at Rs211.93 against the greenback from the previous day’s closing of Rs211.48 in the interbank foreign exchange market.

In the latest falling spree, the rupee made every day a historic low against the greenback. The local unit has never seen any appreciation since June 10, 2022.

The dealers said the local currency is continuously depreciating against the dollar for the last many days because the foreign exchange reserves of the country fell to a critically low level. Besides, fiscal weaknesses and the lack of foreign inflows further added burden on the local currency.

The market was anticipating that the rupee would be supported after the takeover by the new government. But the exchange rate performed even worse under the new government.

The rupee fell Rs27.25, or 14.76 per cent, since the new government has taken over the charge. The local unit was at Rs184.68 on April 8, 2022, compared with the current level of Rs211.93 against the dollar on June 22, 2022.

The local currency remained under pressure throughout the current fiscal year due to the balance of payments crisis. It fell Rs54.39, or 34.52 per cent, since June 30, 2021.

The latest rupee depreciation may be attributed to a sharp decline in the official foreign exchange reserves of the State Bank of Pakistan (SBP). The official foreign exchange reserves of the central bank fell $241 million to $8.985 billion by the week ended June 10, 2022, compared with $9.226 billion on June 3, 2022.

The current level of the SBP’s forex reserves showed that the central bank has import cover for around one month only.

Pakistan’s import bill for May was recorded at $6.777 billion, according to the Pakistan Bureau of Statistics.

The latest foreign exchange reserves of the SBP showed it fell to around 2½ years low. Previously, the foreign exchange reserves held by the central bank were seen at $9.233 billion on December 6, 2019.

The foreign exchange reserves held by the central bank witnessed a record high of $20.146 billion by the week ended August 27, 2021. Since touching the peak, the SBP’s foreign exchange reserves witnessed a continuous decline. The official forex reserves of the SBP fell around $11.16 billion by the week ended June 10, 2022 from touching the peak on August 27, 2021.

Import payments demand is also putting a constant pressure on the local currency. The import bill of the country sharply increased 44.51 per cent to $77.29 billion during July-May 2021/22, compared with $50 billion in the same period of the last fiscal year. This resulted in widening of the trade deficit by 58 per cent to $43.42 billion during the first 11 months of the current fiscal year, compared with the deficit of $27.45 billion in the same period of the last fiscal year.

The current account deficit of the country also ballooned to $13.78 billion during July-April 2021/22, compared with the deficit of $543 million in the corresponding period of the last fiscal year.