Escalating political tension and delay in resumption of the International Monetary Fund (IMF) programme took a toll on market sentiment, as the rupee depreciated to 202 against the US dollar during intra-day trading on Wednesday.
At the time of this report, the rupee was trading at 202.21 against the dollar in the inter-bank market. On Tuesday, the rupee closed at 201.41.
Prior to Wednesday, rupee depreciated for 14 successive sessions, cumulatively losing nearly 8% against the US dollar.
14 sessions of decline: Rupee falls to 201.41 against dollar
With IMF talks ongoing in Doha, amid expectation of delay in a formal announcement, and rising political noise in Pakistan, the market is taking into account lack of a clear economic policy as a signal for further worsening.
On Wednesday, the Pakistan Tehreek-e- Insaf (PTI) began its long march, clashing with law-enforcement personnel, in its bid to pressure the government into calling early elections.
“The market is in panic owing to the ongoing political situation, which is creating massive fluctuations in dollar rates in the market,” Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company Limited, told Business Recorder.
Earlier, the federal cabinet had decided to stop the PTI from holding a long march to the federal capital in order to ensure the safety and security of the residents of the city.
However, on the call of PTI Chairman Imran Khan, party workers have moved ahead from different points in the country especially Punjab and Khyber Pakhtunkhwa.
The rupee’s fall comes despite Saudi Arabia announcing on Tuesday that it is finalising the extension of a $3 billion deposit to Pakistan. However, experts remained skeptical the announcement would be enough to change the rupee position.
“News that Saudi Arabia is finalising the extension of $3 billion deposit is encouraging, but it is not enough to prop up Pak rupee because exchequer needs cash support,” said Asad Rizvi, ex-Country Treasurer of Chase Manhattan Bank.
“Similarly IMF, Chinese and other funds too, are in the pipeline, but the hammering of Rupee has not stopped,” he added.
The story was originally published in Business Recorder on May 25, 2022.