Pakistan rupee depreciated at a record low against the US dollar on Thursday as it dropped to PKR 240.5 against the dollar in the interbank market. The Pakistani currency lost 4.48, or 1.89 per cent, compared to yesterday’s close of 236.02 by 12:03 pm, the Dawn newspaper reported quoting the Forex Association of Pakistan (FAP).
Zafar Paracha, the General Secretary of the Exchange Companies Association of Pakistan, blamed the political situation and the government’s lack of action for the continuous rupee depreciation. “The country’s political situation is bad but the government and political parties appear to be unconcerned. They are only concerned with saving their government,” Paracha said.
The financial markets remained jittery amid an ongoing political crisis. Since the start of 2022, the rupee has lost over 30 per cent of its value, according to the Foreign Exchange Association of Pakistan.
On Wednesday, Pakistan Minister for Finance and Revenue Miftah Ismail expressed hope that the pressure on the rupee would ease in a couple of weeks. “From the next month onwards, incoming dollars in Pakistan by way of exports and remittance will be more than the outgoing dollars by the way of imports and debt servicing. Therefore, pressure on the rupee would subside and the currency would appreciate,” said Ismail.
He said that multiple factors including the US dollar reaching historic highs internationally, interest rate hikes, worldwide inflation and supply chain disruption have led to the rupee’s depreciation. Earlier this month, the IMF reached a staff-level agreement with Pakistan authorities for the conclusion of the combined seventh and eighth reviews of the Extended Fund Facility (EFF).
Despite the agreement, the ongoing political and economic turmoil in the country has raised concerns among investors, Pakistan’s Business Recorder reported. This downfall of Pakistani rupees comes as Moody’s Investors Service and Fitch Ratings said they expect Pakistan to secure the USD 1.2 billion bailout from the International Monetary Fund (IMF).
Once the deal amount will be secured, it is expected that pressure on the country’s currency and forex reserves will ease. “We assume IMF board approval of Pakistan’s new staff-level agreement with the lender,” Krisjanis Krustins, a Hong Kong-based director at Fitch, was quoted as saying by Bloomberg on Wednesday. “This will unlock significant additional financing from the IMF and other multilateral and bilateral sources and may well provide a significant confidence boost to the markets.”