KARACHI: The Pakistani currency on Tuesday hit another all-time low of Rs232.93 against the US dollar as the demand for import payments kept the rupee under pressure, currency traders and analysts said, amid liquidity shortage and political uncertainty.
The Pakistani currency lost its value by 1.31 percent against the dollar as the pressure for import payments built up in the interbank market, where the greenback was trading at a premium. The rupee has devalued by 2 percent this week, while it has lost its value by more than 10.4 percent since July 15, according to the central bank data.
Financial analysts say the rupee is losing its value due to the shortage of dollars in the absence of major foreign inflows that are required to boost the country’s depleting foreign exchange reserves.
“There is liquidity shortage in the market due to high payments for imports made in May and June. The shortage of dollar is constantly keeping the rupee under pressure,” Samiullah Tariq, research director at the Pakistan-Kuwait Investment Company told Arab News.
Pakistan on July 13 reached a staff-level agreement with the International Monetary Fund (IMF) and is expecting $1.17 billion immediately after approval from the IMF board. The South Asian country’s foreign exchange reserves have decreased to $9.32 billion that can barely cover 45 days of imports.
Currency dealers say commercial banks are buying dollars at lower prices and selling them at a premium due to the huge demand for import payments.
“The banks are buying dollars from exporters and exchange companies at lower rates and selling to importers at much higher rates,” Zafar Paracha, general secretary of Exchange Companies Association of Pakistan, told Arab News.
“The difference between the prevailing interbank rate and the rate at which banks are selling dollar to importers is more than Rs10. The government’s inaction shows there is an agreement with the IMF for further devaluation of rupee.”
The central bank did not comment when Arab News asked whether any instructions were issued to banks in this regard.
Analysts say around $4 billion inflows from friendly countries and a likely reduction in trade deficit in July are expected to ease pressure on the rupee.
“The curtailed trade deficit and the inflows from the friendly countries to bridge the financing gap of around $4 billion, as per the authorities’ assurances, are expected to ease pressure on the rupee,” Tariq said.
Pakistan’s Finance Minister Miftah Ismail has predicted the country’s imports would reduce to around $5.5 billion in July, compared to the $7.8 billion recorded in June 2022.
“I have checked with oil sector players and they are saying the sales of diesel and furnace oil are decreasing that means there would be no imports of these products that would help reduce import bill,” Tariq said.
Pakistan’s equities witnessed a mixed trend on Tuesday as all eyes were set on a Supreme Court verdict on a recently held vote for the Punjab chief minister. The stocks closed bullish at the 39,894-level, after gaining 50 points.
