Thursday Apr 21 2022

No respite for falling rupee, free fall continues on IMF programme limbo

A currency dealer is counting $100 notes. — Reuters/File
A currency dealer is counting $100 notes. — Reuters/File

  • Rupee closed at Rs186.97 against the US dollar.
  • Rupee has depreciated by over Rs5 in the last four sessions since Monday.
  • Traders are waiting for the outcome of the IMF-Pakistan negotiations.

KARACHI: The Pakistani rupee’s downtrend continued on Thursday as the currency fell by Rs1.05 (or 0.56%) against the US dollar to close at Rs186.97 in the interbank market due to speculations in the market regarding the supply of the greenback and uncertainty about the resumption of the International Monetary Fund (IMF) loan programme.

According to the State Bank of Pakistan (SBP), the rupee closed at Rs185.92 in the interbank market on Wednesday. The currency has depreciated by Rs5.4 in the last four sessions since Monday.

Speaking to, Alpha Beta Core CEO Khurram Schehzad said: “The market is reacting to the uncertainties regarding rollover of $2.4 billion in debt from China, IMF programme and depleting reserves.”

He revealed that currently, Pakistan’s reserves are not even sufficient for two months, “and rupee depreciates when the investors and traders speculate widening gap between the demand and supply of the US currency.”

Read more: PM will have to take decision on petrol subsidy, we cannot continue it, says finance minister

The rupee has maintained a downward trend for the last 12 months. It has lost 22.78% (or Rs34.7) to date, compared to the record high of Rs152.27 recorded in May 2021.

With a fresh decline of 0.56%, the Pakistani rupee has depreciated by 18.68% (or Rs29.43) since the start of the current fiscal year on July 1, 2021, data released by the central bank revealed.

It is worth mentioning that the high demand for the greenback because of import payments, particularly oil, the dwindling forex reserves and the ambiguity about the IMF loan programme have eroded investors' confidence, driving the rupee down.

Moreover, the market is apprehensive about the lack of foreign inflows and the rupee is likely to remain under pressure until the reserves are built up and steps are taken to tackle the balance of payments and fiscal deficit.

Going forward, the currency market is also eagerly keeping an eye on the balance of payments data for a further clue on the rupee’s future direction.

Read more: Asad Umar and Miftah Ismail feud over the economy

Traders also await the outcome of the IMF-Pakistan negotiations, which will continue till April 24 for which Finance Minister Miftah Ismail and SBP Governor Reza Baqir have reached Washington.

The rupee had been under pressure since the beginning of March when a no-confidence motion was submitted against the then prime minister Imran Khan. The domestic currency dropped to an all-time low of Rs188.18 on April 7 after Khan dissolved the Parliament and called fresh elections in a bid to block an opposition attempt to oust him.

This caused a political crisis in the country. The rupee started recovering on April 8, following a big 250 basis points hike in interest rates by the central bank and the change of government in the country.

Read more: IMF keeps Pakistan's GDP forecast unchanged, but warns against inflation, deficit risks