KARACHI: The rupee continued its downward slide against the dollar in the interbank market on Wednesday as it reached a new all-time low of Rs197.75 against the greenback. The dollar value was increased by Rs2.01 in the interbank market.
This is the tenth consecutive downward session after the rupee closed at an all-time low of Rs195.74 against the greenback in the inter-bank market on Tuesday, according to the State Bank of Pakistan.
There are two trade markets, open and interbank, which run on confidence. The rates of currencies are one to two rupees less in the interbank market to support the trade and investors.
While the dollar was being traded at Rs201 in the open market. Trading is still under way. Another meeting of high officials and Forex Association officials are also expected on Wednesday (today), as the latter has called for imposing a ban on the import of “unnecessary items” in order to decrease the trade deficit.
Imran Sultan, the business editor of Aaj News, termed the apparent further decrease in the rupee value as “highly speculative”. He wondered who would now come to market to buy dollars.
Sultan was of the view that the people were now afraid. “Only the political uncertainty is now prevailing… and this is damaging Pakistan’s economy,” he said while talking to Aaj News.
He stressed the need for improving the country’s political system in order to strengthen the economy, adding that both things are related to each other.
Currency dealers have blamed the impending International Monetary Fund programme, trade deficit, and political uncertainty. In addition, the government’s decision to keep local oil prices unchanged signalled an erosion of the country’s finances and further swelling of the external account. This factor in particular has mounted pressure on the local currency.
Pakistan and the global lender are expected to kick start the talks on the revival of the loan programme in Doha, Qatar on Wednesday (today), Aaj News reported. The IMF has many times asked the government to end the fuel and power subsidies, which were announced by the former prime minister Imran Khan.
The Pakistani delegation is led by the finance secretary in talks with IMF, which are expected to continue till May 25. The country is expected to request the global lender to immediately release the $1 billion loan.
The government on Sunday announced its decision to not withdraw the petrol subsidies “for now”. Due to changing circumstances and international oil prices, the government may have to revisit the decision soon, according to Finance czar Miftah Ismail.
After hitting seven-week highs, oil prices slumped 2% on Tuesday as Reuters reported that the United States could ease some restrictions on Venezuela’s government, raising hopes that the market could see some additional supplies. Prices also fell after Federal Reserve Chairman Jerome Powell warned the economy could be hurt by attempts to reduce inflation.
Brent crude fell $2.31, or 2%, to settle at $111.93 a barrel, and US West Texas Intermediate (WTI) crude fell $1.8, or 1.6%, to settle at $112.40 a barrel.
The direct impact of the rupee devaluing will result in increased oil prices which will eventually jack up the inflation rate because fuel import is the biggest chunk of the country’s import bill. And, the Russia-Ukraine war, which disturbed the oil prices, is not showing any signs of slowing down.
Electricity, food, and fares are going to be high if such a trend continues. Like other parts of the world, the country is also feeling the economic impact of the coronavirus pandemic.
More to follow