KARACHI: The rupee lost 7.6 percent to the US dollar during the previous week, more than what businesses tend to keep in mind over the course of a year in terms of annual currency depreciation, as renewed political uncertainty and heightened concerns over Pakistan’s external financing needs saw the inter-bank market go through a tumultuous five sessions.
The currency endured its worst week in over two decades, hitting fresh lows in each and every session to eventually end at 228.37 against the US dollar. Multiple people Business Recorder reached out to during the week said letters of credit were being opened at rates much higher than the one prevailing in the inter-bank market as well.
The rupee has been under pressure for months as falling foreign exchange reserves and a widening current account deficit was reflected in the currency’s downward slide.
However, during the previous week, political uncertainty was renewed after the Punjab by-polls, where Pakistan Tehreek-e-Insaf (PTI) registered a win against Pakistan Muslim League-Nawaz (PML-N), raising concerns over continuity in economic reforms promised by the coalition government to the International Monetary Fund (IMF).
With fiscal consolidation measures on the backburner in light of the by-polls’ result, Fitch Ratings also moved to downgrade Pakistan’s economic outlook to negative “in view of the significant deterioration in the country’s external liquidity position and financing conditions since early 2022”.
Fitch saw considerable risks to the implementation of the IMF programme and to continued access of Pakistan to financing after the programme’s expiry in June 2023 in a tough economic and political climate.
Pakistan’s foreign exchange reserves also fell further, it was reported during the week, while political noise turned louder ahead of a crucial Punjab Assembly session on Friday where the new chief minister of the province was to be elected.
With the election eventually failing to break the impasse, the rupee is likely to remain under pressure even as the State Bank of Pakistan (SBP) continued to reiterate that Pakistan’s $33.5-billion external financing needs are fully met for financial year 2022-23, saying that “unwarranted” market concerns about its financial position will dissipate in weeks.
In addition to the IMF programme, Pakistan’s hope of meeting its dollar-needs stems from the government’s belief that Islamabad will manage to secure funding from “friendly countries” that will provide both financing and rollover of debt.
Open-market
movement
In the open market, the PKR lost19 rupees for both buying and selling against USD, closing at 228 and 230, respectively.
Against Euro, the PKR lost 21 rupees for both buying and selling, closing at 229 and 231, respectively.
Against UAE Dirham, the PKR lost 4.30 rupees for buying and 4.40 rupees for selling, closing at 61 and 61.60, respectively.
Against Saudi Riyal, the PKR lost 4.50 rupees for buying and 4.60 rupees for selling closing, at 59.50 and 60, respectively.
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THE RUPEE
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Weekly Interbank market rates for dollar
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Bid Close Rs. 230.00
Offer Close Rs. 232.00
Bid Open Rs. 211.00
Offer Open Rs. 211.30
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Weekly Open market rates for dollar
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Bid Close Rs. 228.00
Offer Close Rs. 230.00
Bid Open Rs. 209.00
Offer Open Rs. 211.00
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Copyright Business Recorder, 2022