KARACHI: Pakistan’s national currency on Monday continued its downward slide as the United States (US) dollar closed at Rs177.89, with analysts and traders attributing rupee's decline to high demand of greenback for import payments.
The rupee lost 18 paisas or 0.10% in the interbank market during the trading session on Monday, according to the State Bank of Pakistan (SBP) data.
The Pakistani currency has been under pressure since May this year and has lost almost 17 percent of its value due to higher dollar outflows, mainly for import purposes.
“The outflow of dollar is more than the inflows because of the prevailing huge gap between imports and exports,” Adil Jilani, an analyst at Trust Securities & Brokerage, told Arab News.
Pakistan’s trade deficit posted an increase of 112 percent to $20.6 billion during July-November 2021, according to the Pakistan Bureau of Statistics (PBS). The country’s import bill for the month of November alone stood at $7.8 billion.
Analysts say dollar inflows are limited and insufficient to meet the demand in the absence of an International Monetary Fund (IMF) program, higher trade deficit and low foreign investment.
Last month, Pakistani authorities and IMF reached a staff-level agreement on policies and reforms needed to complete the sixth review of the $6 billion loan program between the global lender and Islamabad.
Completion of the review would allow the release of a $1,059 million tranche to Pakistan, which would bring total disbursements to about $3,027 million and help unlock significant funding from Islamabad's bilateral and multilateral partners.
Analysts believe the Pakistani currency would stabilize in January 2022 when the IMF executive board revives the loan program, which would unleash funding from other lenders too.
“There is continuous outflow of greenback that is exerting pressure on Pakistani rupee that is because of lack of inflows as foreign and portfolio investments are at lower side,” Jilani said. “Besides, our loans have been stuck up due to the IMF program.”
Jilani said the lack of inflows was promoting "dollarization" in the country as everybody was buying the greenback to benefit from exchange rate disparity.
Currency dealers say Afghanistan’s import burden is also exerting pressure on Pakistani rupee.
“Pakistan is importing goods in dollars and Afghanistan buys that in rupee which is also putting rupee under pressure,” Malik Bostan, chairman of Exchange Companies Association of Pakistan (ECAP), told Arab News.
Pakistani equity market was bearish and shed 519 points to close at 42,876 points on Monday, amid expectations of further monetary policy tightening and a weak rupee.
“Stocks closed lower on uncertainty over SBP policy tightening tomorrow and weak rupee,” Ahsan Mehanti, chief executive officer (CEO) of the Arif Habib Corporation securities and brokerage firm, told Arab News.
“Surge in savings rates, higher government bond yields, likely finance ministry announcement of a mini budget for resumption of IMF program and uncertain Pak-US relations played a catalyst role in bearish close.”