The rupee fell for the second consecutive session against the US dollar, closing near the 208 level in the inter-bank market on Wednesday.
As per the State Bank of Pakistan (SBP), the local currency settled at 207.99, a depreciation of Rs1.05 or 0.50%, against the greenback.
On Tuesday, the rupee closed at 206.94 after a depreciation of Rs2.38 or 1.15% against the US dollar.
The fall comes as analysts maintain that Punjab government’s latest measure to provide free electricity to households consuming up to 100 units has irked sentiment as the development could derail progress made with the International Monetary Fund (IMF) that has reiterated its stance on energy subsidies.
Brushing aside those concerns, Finance Minister Miftah Ismail on Tuesday said that IMF should not be worried about Punjab government’s move.
Speaking on Aaj News programme, ‘Faisla Aap Ka’, the finance minister said that it is a “good subsidy”.
Miftah explained that usage of funds by provinces is out of the IMF’s scope. “I have given the money to provinces. What they do with that money is their concern,” he said.
The finance minister said that his responsibility was to reduce the budget deficit, collect revenue and give money to the province. “I have done all three,” he remarked.
Miftah added that he was in touch with the IMF on a daily basis.
Pakistan has been actively pursuing the IMF to revive its stalled Extended Fund Facility (EFF).
The programme is widely seen as crucial for Pakistan’s economy, which has struggled with high inflation and a widening current account deficit.
“If the provincial government’s measure remains financed, there is no concern,” Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder.
The analyst said that the rupee is under pressure due to upcoming import payments.
“The pressure would persist till the Eid holidays. However, if the IMF programme is revived, the pressure would subside,” he said.
Meanwhile, the Monetary Policy Committee (MPC) of the SBP is set to meet on Thursday (July 7, 2022) with the expectation of further monetary tightening due to higher inflation outlook.
In the previous meeting held in May, the MPC raised the policy rate by 150 basis points to 13.75%, aimed at containing rising inflation and mitigating the risks to external stability.
The current policy rate of 13.75% is the highest since June 2011.