KARACHI: Pakistan’s national currency took another dip in the interbank market and hit a fresh all-time low of Rs205.16 against the US dollar, currency dealers and analysts said, as the South Asian country battles to curtail its imports amid declining foreign exchange reserves.
The Pakistani currency declined by 0.74 percent, or Rs1.30, against the greenback as uncertainty continued to dampen investor sentiment in the absence of foreign exchange inflows.
“Today was another bad day for economy as our currency kept falling against the US dollar due to its high demand for import payments,” Zafar Paracha, a senior currency analyst, told Arab News.
“At one time during the session, the dollar was trading at Rs206. The depreciating rupee continues to bedevil the economy, with increasing imports at higher prices causing inflationary impacts in the country.”
The South Asian country is negotiating with the International Monetary Fund (IMF) to get the stalled $6 billion program revived, which will immediately release around $1 billion, vital to boost Pakistan’s depleting forex reserves. The IMF approval of the program will also help unlock funding from other bilateral and multilateral sources.
“We don’t see any apparent reasons for such erratic movement in the exchange rate, which is quite unusual at present,” Paracha said. “Apart from that if the authorities have any deal with the IMF to further devalue rupee.”
Currency dealers say the continuous fall in foreign exchange reserves and the rising demand for dollar for the import of commodities, including oil, is exerting pressure on the local currency.
During the week ending on June 3, Pakistan’s reserves decreased by $497 million to $9.2 billion, not even enough to support import payments of two months, due to external debt repayment.
Dealers say the demand for imports, particularly crude oil, is pushing the greenback high in the interbank market.
“The demand for dollar for the import of energy products alone is $120 million per day in the backdrop of increasing prices in the international market,” Malik Bostan, president of the Exchange Companies Association of Pakistan (ECAP), told Arab News.
“Foreign banks are not opening Letters of Credit (LCs) for the import of oil and gas and demanding 100 percent payment for the purchases.”
Dealers and analysts say the Pakistani currency will remain under pressure due to a lack of foreign inflows, but the government, through successful negotiations with the IMF, could unlock funding that would ultimately ease pressure on rupee.
