ISLAMABAD: The Pakistani rupee broke all previous records by falling to a new low of Rs 224 against the US dollar on Tuesday before closing at Rs 222 in the interbank market.
Analysts believe that domestic political and economic conditions alone are not responsible for the devaluation of the rupee. “The dollar is strengthening against almost all world currencies in the global market and the Pakistani rupee is no exception,” said Khurram Shahzad, chief executive officer of investment firm Alpha Beta Core.
According to the Forex Association Pakistan (FAP), the local currency fell by Rs 8.80 in the interbank market after closing at Rs 215.20 on Monday. However, according to the State Bank of Pakistan (SBP), it closed at Rs 221.99, up 3.1%.
After reaching a peak of Rs 211.93 on June 22, the dollar started falling for some time and fell to a low of Rs 204.56 on July 4. Since then the rupee has been fluctuating.
Shahzad said that Pakistan’s external account issues are not yet resolved International Monetary Fund Not yet on board to release funds. “As global rating agencies have a negative outlook on the economy, it is therefore an additional burden on the financial markets in general and the forex market in particular,” he said.
The IMF on Thursday said it has reached a preliminary agreement with Pakistan to revive a $6 billion bailout package for the country, which has been reeling from a severe economic crisis since last year. Pakistan and the IMF originally signed the agreement in 2019. But tranches of more than $1 billion had not been issued since the beginning of this year. That’s when the IMF expressed concerns about Pakistan’s compliance with bailout conditions under former PM Imran KHAN,
Khan was ousted in a no-confidence motion in April and the new government, led by Prime Minister Shahbaz Sharif, has been in talks with the IMF since May to avoid a default similar to that of Sri Lanka.
Forex Association of Pakistan (FAP) President Malik Boston gave three reasons behind the continuous devaluation of the rupee.
“Investors are upset at the moment as Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) has won a landslide victory over Pakistan Muslim League-Nawaz (PML-N). Punjab Bypolls create uncertainty over the future of the current political system,” said the currency trader. Furthermore, he said the IMF’s bailout approval would take time and that the global moneylender’s statement of being ready to hold talks with a caretaker government has also fueled the devaluation.
Additionally, Bostan pointed out that since the Taliban occupied Afghanistan last year, Pakistan has provided them with trade relief, resulting in additional pressure on the rupee.
Forex experts said the SBP cannot interfere in the rising rupee-dollar parity as the country has agreed with the IMF that the central bank will not intervene.
“Even if it wants to intervene, SBP does not have enough dollars to enter the market,” said forex experts. He said that if the government wants to save the rupee, it will have to cut imports.
Analysts believe that domestic political and economic conditions alone are not responsible for the devaluation of the rupee. “The dollar is strengthening against almost all world currencies in the global market and the Pakistani rupee is no exception,” said Khurram Shahzad, chief executive officer of investment firm Alpha Beta Core.
According to the Forex Association Pakistan (FAP), the local currency fell by Rs 8.80 in the interbank market after closing at Rs 215.20 on Monday. However, according to the State Bank of Pakistan (SBP), it closed at Rs 221.99, up 3.1%.
After reaching a peak of Rs 211.93 on June 22, the dollar started falling for some time and fell to a low of Rs 204.56 on July 4. Since then the rupee has been fluctuating.
Shahzad said that Pakistan’s external account issues are not yet resolved International Monetary Fund Not yet on board to release funds. “As global rating agencies have a negative outlook on the economy, it is therefore an additional burden on the financial markets in general and the forex market in particular,” he said.
The IMF on Thursday said it has reached a preliminary agreement with Pakistan to revive a $6 billion bailout package for the country, which has been reeling from a severe economic crisis since last year. Pakistan and the IMF originally signed the agreement in 2019. But tranches of more than $1 billion had not been issued since the beginning of this year. That’s when the IMF expressed concerns about Pakistan’s compliance with bailout conditions under former PM Imran KHAN,
Khan was ousted in a no-confidence motion in April and the new government, led by Prime Minister Shahbaz Sharif, has been in talks with the IMF since May to avoid a default similar to that of Sri Lanka.
Forex Association of Pakistan (FAP) President Malik Boston gave three reasons behind the continuous devaluation of the rupee.
“Investors are upset at the moment as Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) has won a landslide victory over Pakistan Muslim League-Nawaz (PML-N). Punjab Bypolls create uncertainty over the future of the current political system,” said the currency trader. Furthermore, he said the IMF’s bailout approval would take time and that the global moneylender’s statement of being ready to hold talks with a caretaker government has also fueled the devaluation.
Additionally, Bostan pointed out that since the Taliban occupied Afghanistan last year, Pakistan has provided them with trade relief, resulting in additional pressure on the rupee.
Forex experts said the SBP cannot interfere in the rising rupee-dollar parity as the country has agreed with the IMF that the central bank will not intervene.
“Even if it wants to intervene, SBP does not have enough dollars to enter the market,” said forex experts. He said that if the government wants to save the rupee, it will have to cut imports.