The value of the Pakistani rupee has depreciated by 34 rupees in interbank trading since Thursday
Karachi:
The ailing Pakistani currency fell to its lowest levels against the US dollar in the interbank and open market on Friday, closing at Rs. 262.6.
At one point, the currency depreciated to 265 rupees in the open market and 266 rupees in the interbank market, before recovering slightly at the end of the day.
According to the State Bank of Pakistan, the currency fell 7.17 rupees, or 2.73 percent, at market open on Friday from Thursday’s close.
The value of the Pakistani rupee has depreciated by 34 rupees in interbank transactions since Thursday, the largest absolute and percentage devaluation since the new exchange rate regime was introduced in 1999.
The Pakistani rupee has depreciated sharply after the government removed an unofficial cap on the USD-PKR exchange rate in a bid to revive the International Monetary Fund’s (IMF) stalled lending program.
The government decision came on Thursday after exchange firms announced the removal of a self-imposed interest rate cap in the open market.
The country must complete the ninth review of a $7 billion IMF program that would not only result in a $1.2 billion disbursement but also unlock inflows from friendly countries and other multilateral lenders.
IMF terms include market-based dollar-rupee exchange rate parity and a high interest rate, and imposing a 17 percent general sales tax on diesel and gasoline within a week.
The first two conditions are already met.
A significant amount of remittances flowed into the country through official channels on Friday, according to the Exchange Companies Association of Pakistan (Ecap).
A financial analyst, Hameed Khokar of CX Investments, expected the flow of remittances to increase in the coming days, believing that it would again surpass $2.5 billion per month and gradually reach almost $3 billion in the coming months.
He said remittances from exports would also improve in the coming months.
Khokar said the main challenge for the government is to support foreign exchange reserves and improve the foreign exchange market to stabilize currency parity and keep imported goods stuck in port.
More than 9,000 containers are also stuck at Karachi ports awaiting customs clearance, including those containing key commodities, petroleum products, LNG and soybeans.
Other financial analysts have also supported the government’s decision to remove the dollar cap, believing that if it had happened sooner, the country would not have to pay huge inflationary costs in the coming months and would lose $6 billion in various items.
Director of financial data and analytics portal Mettis Global Saad bin Naseer also said that after the cap was lifted, remittance inflows including export earnings have come through official channels again.
Ecap Secretary-General Zafar Paracha said that while the central bank had assured exchange companies that dollars would be delivered, they would not receive them yet.
If supplies were restored and the government’s “complex” policies corrected, the rupee’s depreciation could be halted, he added.
Meanwhile, the central bank’s foreign exchange reserves continued to slide, hitting a new nine-year low of $3.678 billion in the week ended Jan. 20.
The SBP said Thursday its foreign exchange holdings fell by $923 million over the week on external debt repayments.
However, financial analysts remain confident that the economic situation would improve if Prime Minister Shahbaz Sharif confirms that the government will implement all IMF conditions to revive its program.
Prime Minister Shahbaz Sharif expressed confidence on Friday that the IMF would release the funds by next month.
He said the government is in talks with the IMF to resolve the issue as soon as possible.
(Except for the headline, this story was not edited by NDTV staff and was published by a syndicated feed.)