Rupee plunges to new record low of 298.93

• Local unit falls Rs8.71 against dollar in interbank market.
• Dollar bonds due 2031 fall to lowest since November.
• New rate is just Re1 away from much-awaited rate of Rs300.

KARACHI: The rupee slumped to a record low of 298.93 amid political tumult in the wake of clashes that broke out in the country following the arrests of senior leaders of the Pakistan Tehreek-e-Insaf (PTI) 

The local unit fell Rs8.71, or 3%, against the dollar on Thursday closing at 298.93 in the interbank market, data released by the State Bank of Pakistan (SBP) showed.

It should be noted that the dollar bonds due 2031 fell to the lowest since November on Thursday and were indicated at 33.10 cents on the dollar. 

The new rate is just Re1 away from the much-anticipated rate of Rs300 per dollar.

The rupee depreciation has piled up foreign debt without taking new external loans, making imports further expensive for Pakistan, which faced a six-decade high inflation reading at 36.4% in April 2023.

Financial pundits believe that the rupee has been depreciating due to political and social unrest caused by the arrest of PTI Chairman Imran Khan.

Moreover, the dollar demand-supply gap has also widened as the exporters have stopped selling US currency on speculations that the rupee would depreciate further versus the greenback. On the other hand, importers are seen rushing to buy dollars.

This gap in the demand and supply of foreign currency in the interbank market has contributed to the rupee’s devaluation.

The political situation would improve in a day or two and help the currency stabilise around the current levels or partially recover ground against the greenback.

“Pressure had built up after a few months of stability,” Saleem Amjad, chief executive officer at Link International Exchange Company, told Bloomberg.

“Sentiment turned sour given the political turmoil, the prospect of another delay in the IMF loan and a drop in remittances.”

Dr Khaqan Najeeb, former finance ministry adviser, said that continuing political instability has taken a toll on market sentiment pushing the Pakistani rupee to hit a record low.

“The heightened political turmoil has come at a time when the economy has been in the doldrums for months largely due to an acute balance of payment crisis, with falling State Bank of Pakistan reserves barely covering a month of highly controlled imports,” he commented a day earlier.