Pakistani market in ‘panic’ due to further fall in currency against US dollar

The rupee fell 2% on Monday and 3% on Tuesday despite last week’s staff-level agreement with the International Monetary Fund (IMF) that would pave the way for $1.17 billion disbursements under the resume payments of a bailout package .

225 per Wednesday morning. was doing business on U.S. Dollarended at 221.99 on Tuesday when the Fitch rating agency revised its outlook for Pakistan’s sovereign debt from stable to negative – though it reaffirmed its long-term foreign-currency and issuer default rating at “B-“.

“There is panic in the market, I fear it (the rupee) will go down further,” Zafar Paracha, general secretary of the Foreign Exchange Association of Pakistan Exchange Companies, told Reuters.

Paracha said he sees no reason for depreciation in the rupee other than the possible pre-conditions of the IMF. Neither the government or the IMF has said anything about the need for further depreciation of the currency, although Pakistan has recently adopted a market-based exchange rate as part of the IMF’s advice on the economic reform agenda.

The State Bank of Pakistan said in a series of posts on Twitter late Tuesday, “The recent volatility in the rupee is a feature of the market-determined exchange rate system.” The depreciation of the rupee against the dollar is a global phenomenon.

Pakistan is facing economic turmoil, with rapidly depleting foreign reserves, a dwindling currency and rising fiscal and current account deficits, and the rupee has lost 18% of its value since December 21.

Stocks have fallen to $9.8 billion, which is barely enough to pay for 45 days of imports.

With Prime Minister Shahbaz Sharif’s government taking over from ousted Prime Minister Imran Khan in April, Pakistan has also gone through another period of political instability.

The move by Fitch followed a sharp loss of record fall on Tuesday on the sovereign dollar bonds issued by Pakistan, while the Pakistan Stock Exchange’s KSE100 index, KSE, fell 2.36%.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.

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