Monday Oct 18, 2021
KARACHI: The US dollar continued to soar against the Pakistani rupee, reaching a new historic high in the inter-bank market on Monday.
The Pakistani rupee continued to weaken, shedding an additional Rs1.60 against the US dollar, which closed at Rs172.78 in the inter-bank market.
With a fresh decline of 0.93%, the rupee has depreciated 9.67% (or Rs15.24) since the start of the current fiscal year on July 1, 2021, data released by the State Bank of Pakistan (SBP) revealed.
According to data of the central bank, it has cumulatively dropped 13.46% (or Rs20.51) since its recent high of Rs152.27 against the greenback recorded on May 14, 2021.
Last week, speaking at the launch of the Kisan Portal, Prime Minister Imran Khan had said that the pressure on the Pakistani rupee is temporary and will be over soon.
Economists say that the main reason for the rise in the value of the dollar and the depreciation of the rupee is Pakistan's current account deficit and IMF's demand for further devaluation of the rupee.
Analysts had earlier predicted that the downtrend is expected to end soon as analysts suggest that the successful conclusion of the discussion between the IMF and Pakistan to resume a $6 billion loan programme will stabilise the rupee value at around current levels.
“The rupee volatility will end if policy talks between Pakistan and the IMF conclude successfully during the three days from October 13 to 15,” Pakistan-Kuwait Investment Company Head of Research, Samiullah Tariq, had told Geo.tv.
However, in case the two sides fail to find a middle ground and talks end on an unsuccessful note, the rupee may cross several limits on the downside.
Meanwhile, sources have said that that Prime Minister Imran Khan is having a meeting on inflation and the economic situation in the country.
According to the sources, the premier is expected to make an important announcement regarding public relief in this meeting.
Sources said that a roadmap has been prepared by the Prime Minister to deal with the rising inflation and public reaction to it. He will reportedly brief the concerned authorities about his roadmap.
According to the sources, the provincial chief secretaries have also been taken on board and have been instructed to loop in the deputy commissioners.
PM Khan wants steps to be taken to control the rising inflation immediately, the sources said.
The impression that Pakistan's negotiations with the IMF have failed is false, said Adviser to the Prime Minister on Finance Shaukat Tarin Sunday.
Speaking exclusively to Geo News, the prime minister's adviser had said Pakistan is still negotiating a deal with the IMF.
"The impression that talks with the IMF have failed is false," he said.
"I always bluntly tell you like it is and I did the same today, tell you why we are in the mess that we are in today," he said. "I have told you about the deficiencies and how we fix them."
He said the secretary of finance is still in Washington. Tarin said the country's economic situation will improve. "Give us a little time, an incompetent person like me will deliver for you" he said.
A press statement by the Ministry of Finance confirmed what the prime minister's advisor had earlier said.
"Negotiations between Pakistan and IMF are moving forward positively. Secretary Finance Division is leading the talks in Washington DC while the technical teams of both sides are continuing detailed discussions in virtual format after exchange of relevant data sets," it said.
"No timeframe was set at any stage for conclusion of the talks".
As per an earlier report in The News, the IMF remains unsatisfied despite Pakistan's tough measures due to which the two sides have failed to reach a staff-level agreement.
Despite hectic efforts and fulfilling the toughest conditions of the IMF on account of raising the electricity tariff by Rs1.39 per unit on average for baseline tariff, raising POL prices by Rs10.49 for petrol and Rs12.44 for diesel, the IMF staff is still unsatisfied with the macroeconomic framework under the Memorandum of Economic and Financial Policies (MEFP) and without agreement over it, the staff-level agreement will not be struck and the IMF tranche will be jeopardised.
Sources had said that it was a worrisome development that the IMF staff was so far busy in crunching numbers mainly on the fiscal framework, external front and power sector.
Extraordinary expertise is required for reconciliation on the MEFP as any insertion of wrong or nonviable figures could result in the suspension of the IMF programme. Any failure to reconcile the projections would hamper Islamabad from accomplishing all future reviews under the $6 billion EFF arrangement.
To complete the 36 months of the Extended Fund Arrangement, Pakistan will have to complete 12 reviews, therefore finalisation of the MEFP with deft management and professional skills is critical.
The State Bank of Pakistan (SBP) projected the current account deficit (CAD) to hover around 3% of the GDP, equivalent to $9.5 billion for the current fiscal year. However, the IMF has pitched the CAD on the higher side and the MEFP would give a clear picture but the Fund staff is projecting it over 4% of the GDP.