KARACHI: The Pakistani rupee recorded a significant single day decline of Rs6.79 against the dollar on Tuesday to hit the historic low of Rs221.99 as the country faces a serious political and economic crisis.
The local unit shed Rs6.79 to close at Rs221.99 to the dollar from Monday’s closing of Rs215.20 in the interbank foreign exchange market.
The analysts said that the decline in the value of rupee came amid uncertain political situation in the country after Pakistan Tehreek-e-Insaf (PTI) swept the by-polls in Punjab.
The local unit witnessed a significant decline for the two consecutive sessions as the political uncertainty prevailed in the country besides worsening economic conditions which resulted in panic buying of the dollar, they added.
Additionally, due to the worsening liquidity and limited external funding since the beginning of this year, Fitch on Monday downgraded Pakistan’s outlook to negative from stable, while affirming its long-term foreign-currency (LTFC) issuer default rating (IDR) at B-.
In a statement, Fitch Ratings said that the revision of the outlook to negative reflects a significant deterioration in Pakistan’s external liquidity position and financing conditions since early 2022.
With the recent turmoil on the political front, the investors and traders raised concerns regarding the agreement with the International Monetary Fund (IMF) for the much needed inflows to provide some respite to the local unit.
Pakistan and the IMF have agreed to resume the multibillion dollar loan programme, however, with an uncertain future of the coalition government, the market experienced renewed concern regarding the programme.
The dwindling foreign exchange reserves of the country also kept the market under pressure. Pakistan’s total liquid foreign exchange reserves dropped $132 million to reach $15.611 during the week ended on July 7, compared with $15.742 billion on June 30.
The SBP’s reserves declined $99 million to $9.717 billion during the week ended on July 7, compared with $9.816 billion during the previous week. Similarly, the net foreign reserves held by commercial banks were also down $33 million to $5.893 billion.
The current account deficit remains one of the key challenges for the stability of the rupee, as after moderating in the previous three months, it rose to $1.4 billion in May, on the back of lower exports and remittances partly due to the Eid holiday.
The trade deficit rose to $4.8 billion in June, more than $1.7 billion higher than its February low. While non-energy imports have continued to moderate in the last three months on the back of curtailment measures by the government and the SBP.
The total trade deficit of the country 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 Rs17.14 or 8.36 per cent from Rs204.85 to dollar on June 30, 2022 to the current level of Rs221.99.
At the open market, the buying and selling of the dollar was recorded at Rs216 and Rs219 at 4:30pm PST.
