The Pakistani rupee continued its downward spiral on Monday as it closed at 194.18 in the inter-bank market, its weakest level against the US dollar, taking the currency’s cumulative fall since April 16 to an astonishing 6.5%.
As per the State Bank of Pakistan (SBP), the currency depreciated Rs1.65 or 0.85% day-on-day. During the session, the US dollar surged by Rs1.47 in the interbank.
“Since the arrival of the new government, the dollar has surged by Rs11.07,” said Zafar Paracha, General Secretary at Exchange Companies Association of Pakistan.
Owing to the rise in the US dollar since April 11, debt has increased by Rs1400 billion, he added.
In the previous week, the rupee lost 3.1% of its value against the US dollar in the inter-bank market, with Pakistan’s currency hitting new record lows to end at 192.53 on Friday, its weakest closing in history.
The rupee lost value in all five sessions, as worry increased over the state of the economy, falling foreign exchange reserves and a widening trade deficit. The market has also been in panic and speculation mode over uncertainty around the International Monetary Fund (IMF) programme.
Finance Minister Miftah Ismail on Sunday said that the government has decided not to increase petroleum prices for now but did not rule out adjustment in days ahead owing to sharp increase in crude oil prices in the international market and also to secure revival of the IMF programme.
Other economic indicators continued to worsen after Pakistan’s trade deficit widened by 64.90% from $23.826 billion in July-April 2020-21 to $39.290 billion in July-April 2021-22 amid increase in the import bill.
The country’s imports during July-April (2021-22) totalled $65.537 billion, up from $44.731 billion during the corresponding period of last year - an increase of 46.51%, according to the Pakistan Bureau of Statistics.
Meanwhile, overall exports during July-April (2021- 22) totalled $26.247 billion against $20.905 billion during the corresponding period of last year, an increase of 25.55%.
Talking to Business Recorder, Saad Khan, Head of Research at IGI Securities, said that the rupee will remain under pressure as the dollar rate index has reached an all-time high, owing to high demand of dollars against other currencies.
“This is being reflected with the Pak rupee, and unlike other currencies the recovery chances for the rupee are low owing to the deteriorating domestic economic situation,” said Khan.
The analyst was of the view that the government needs to do away with the fuel subsidy at the earliest in order to get into the IMF programme. He also said stringent measures should be taken to curb the import of non-essential items such as autos and smartphones.
“There seems to be a lack of will to take these measures by the government as they will not be politically popular,” said Khan.
This story was first published in Business Recorder on May 16, 2022.