The Pakistani rupee's downward slide continued as it dropped to an 11-month low against the US dollar after a fresh 0.65% fall on Wednesday.
As per the State Bank of Pakistan (SBP), the currency closed at 166.28 against the dollar in the inter-bank market after a decrease of another Rs1.08 or 0.65%. The US dollar last hit the 166 level back in September last year.
The PKR has now depreciated 5.3% since June 2021, and 8.4% since its recent high against the dollar, according to AHL Research.
The PKR has been on a downward trajectory since May 2021, with the rising import bill and a widening current account deficit putting pressure on the rupee.
Samiullah Tariq, Head of Research and Development at Pakistan Kuwait Investment Company Limited, said the market-based exchange rate is determining the value now.
"Since the implementation of the flexible exchange rate in 2019, flows from international lenders as well as international markets cannot be used ‘to defend the currency’," said Tariq.
On Tuesday, the SBP said it has received $2.75 billion from the International Monetary Fund (IMF) as part of the newly-allocated Special Drawing Rights (SDR). Many believed this would help the currency, but the introduction of a market-based exchange rate, where supply-and-demand factors determine the movement, has meant that this was not going to be the case.
PKR continues to lose ground against USD, closes at Rs165.2 in inter-bank market
While talking to Business Recorder, Tariq said that the increase in demand of dollar and drop in supply, amid import payments has increased the pressure on PKR. He was of the view that the exchange rate would stabilise at the 167-168 level.
According to provisional foreign trade figures, during the first month of the current fiscal year (2021-22), country's goods import payments increased significantly by 51% to $5.396 billion in July 2021 compared to $3.557 billion July 2020.
Meanwhile, Pakistan's current account posted a $773-million deficit during the first month of the current fiscal year (FY22) due to a higher import bill.
Higher import payments mean an outflow of dollars, resulting in pressure on the rupee.