Thursday May 26, 2022
KARACHI: Pakistan’s rupee hit a historic low on Thursday of 202.01 against the US dollar in the interbank market, below the previous close of 201.92, after the failure of talks with the International Monetary Fund (IMF).
Pakistan and the IMF have failed to reach a staff-level agreement for the revival of the $6 billion programme as the Fund emphasised the “urgency of concrete policy actions, including removing fuel and energy subsidies.”
In line with the financial pundits’ predictions, the local currency continued its downward slide following the delay in the revival of the IMF programme.
Read more: IMF insists removal of petroleum subsidies to revive much-needed programme for Pakistan
The IMF assistance has been stalled since a disagreement with the previous government over energy subsidies in late February.
Pakistan is facing a fast depletion of foreign exchange reserves and analysts have been warning that the country is at risk of defaulting on its external debts.
The mounting political unrest, after the former prime minister Imran Khan marched towards the federal capital and gave a six-day ultimatum to the govt to force early elections, shook investors’ confidence in the economy, putting pressure on the local unit.
The country needs foreign inflows to bolster its forex reserves, which have fallen to $10.2 billion, enough to meet the cost of fewer than two months of imports.
Read more: Saudi Arabia finalising extension of $3 billion deposit to Pakistan
The country is struggling with a soaring trade deficit fuelled by higher imports. And the rising yields on Pakistan's international bonds indicate investor concern about the country’s precarious balance of payments position and increased risk that borrowers may face problems in future if external obligations worsen further.
These fears have led to the weakening of the local unit, which has depreciated by nearly Rs20 since the ruling coalition took office last month.