ISLAMABAD: Pakistani currency weakened to a record low at Rs156 to the US dollar at a point of trade in the inter-bank market on Friday.
The currency has freshly lost Rs3.10 from yesterday’s close Rs152.90- a cumulative drop of Rs8.62 in the past six working days since June 3.
“[Apparently] the mounting import payment and foreign debt repayment pressures have led to the rupee’s plunge,” Next Capital Managing Director Muzammil Aslam said while talking to newsmen.
A long list of import orders – which could not be processed by banks due to the Eid and weekly holidays from June 4 to 9 – created higher demand for dollars in the inter-bank market, he said.
Secondly, Pakistan is scheduled to make most of the external debt repayment and interest payment by the end of June. “These two developments have created massive demand for dollars at a time when the country’s foreign currency reserves are depleting consistently,” he said.
Rupee hits all-time low at 152.9 against the dollar The State Bank of Pakistan (SBP) reported on Thursday “during the week ended June 3, 2019, the SBP’s reserves decreased by $55 million to $7,807.2 million due to payments on account of external debt servicing.”
The reserves stand insufficient to cover even two months of import payments. On an average, Pakistan has made import payments worth $4.5 billion a month over the past 10 months. Apart from the drop in the reserves, market talk suggests the PTI government will allow the rupee to depreciate to Rs160-165 to the greenback under the International Monetary Fund (IMF)’s condition for a bailout package of $6 billion.
High government officials have, however, denied this time and again and have stated no level has been agreed for rupee depreciation. However, the government will end state control of the rupee-dollar exchange rate and let market forces determine the rate.
Adviser to PM on Finance Dr Abdul Hafeez Shaikh said at the post-budget press conference on Wednesday that the IMF Executive Board would approve the loan in two to four weeks.
Taurus Securities analyst Mustafa Mustansir said that heavy tax-loaded budget has made market participants panic as the government has announced withdrawing zero-rated tax incentive from the five main export sectors including textile, leather, carpet, sports and surgical goods. Accordingly, the government has imposed 17 per cent general sales tax on the five zero-rated sectors. This may further deteriorate Pakistan’s exports, which have already remained sluggish for past several years due to lack of planning, he said.
The government has announced narrowing down current account deficit to $7 billion in next fiscal year compared to estimated $12 billion in the outgoing year.
“However, the government did not announce concrete measures in the budget as to how it would contain the deficit,” he said. “The situation has created panic-like situation in the inter-bank market and mounted pressure on the rupee,” he said.