For the first time in the country’s history, on Thursday, the Pakistani rupee has dropped to Rs200 against the US dollar during intra-day trading as the lack of clarity on both economic and political fronts continued despite the resumption of talks between the International Monetary Fund (IMF) and Pakistani authorities.
Investors have expressed that the government’s inability to implement IMF conditions has raised concerns about the revival of the stalled $6 billion Extended Fund Facility (EFF) programme. Meanwhile, ongoing domestic political uncertainty further deteriorated sentiments in the market.
On Wednesday, the currency had closed at 198.39 after a day-on-day depreciation of Rs2.65 or 1.3%, as the rupee officially crossed the 200-barrier in the open market.
Talks between Pakistan and the IMF are underway in Doha, as the South Asian country seeks the revival of the IMF programme.
Federal Minister for Finance and Revenue Miftah Ismail held a virtual meeting with IMF Mission Chief Nathan Porter on Wednesday.
During the meeting, Ismail reaffirmed the government’s commitment to undertake reforms envisaged under IMF’s programme and to complete its structural benchmarks. He said that the government understands it will have to take tough decisions while mitigating the effects of inflation on middle to low-income groups.
He emphasised that some of the issues that have adversely affected the economic situation were beyond the government’s control. These included exogenous factors - such as supply shocks, commodity supercycle and the Russia-Ukraine conflict - that were putting pressure on the current account as well as foreign exchange reserves.
Porter shared IMF’s assessment of the challenges facing the economy and said Pakistan’s economy demanded both immediate and long-term measures.
The government is currently seeking an extension to the IMF programme until June 2023 with an additional loan amount of $2 billion.
The revival of the programme is seen as crucial for cash-strapped Pakistan, which has seen its foreign exchange reserves plummet in recent weeks dropping to $10.31 billion last week, amid import payments and debt servicing.