Rupee crashes to all-time low of Rs200 against dollar amid uncertainty
ISLAMABAD – Local currency plunged to lowest ever level on Wednesday, as US dollar for the first time in Pakistan’s history went beyond Rs200 benchmark in open market mainly due to uncertainties on political as well as economic fronts.
In the open market, the US currency was being traded at Rs200.50. Meanwhile, dollar value reached Rs198.39 in interbank on Wednesday as against Rs195.74 on Tuesday. Currency has depreciated by 1.34 percent in a single day in interbank. The currency is under pressure from last several days. Rupee has depreciated by 6.83 percent or Rs12.7 percent since May 10 this year. US dollar was traded at R188.66 on May 10, which has now gone beyond Rs200 benchmark in open market. The main reasons behind currency depreciation are uncertainties on political and economic fronts and declining foreign exchange reserves amid massive growth in the country’s imports.
Market sources believed that rupee could gain its value if talks between Pakistan and International Monetary Fund (IMF) remain successfully. The IMF would release around billion of dollars for Pakistan in case Islamabad satisfies the Fund, which would build the confidence of the market. “Talks with the IMF Mission started today (Wednesday),” said ministry of finance. Talks are expected to complete in next week.
The coalition government is struggling to maintain the foreign exchange reserves, which are declining due to the repayment against previous loans and financing current account deficit. Foreign exchange reserves held by the State Bank of Pakistan have touched $10.3 billion in last week, which are lowest since June 2020. Currency dealers say the unexpectedly high imports bill and low foreign investment were not in support of the exchange rate while over $13 billion current account deficit was already there as a challenge for the government. The country’s is receiving record foreign remittances, which also failed to strengthen the currency. “Rupee value can appreciate if uncertainty on economy and political side ends,” said an economist who is part of the government’s economic advisory council. He further said that government should take tough decision especially increasing oil and electricity prices. These measures would not only remove uncertainty but it would also help in talks with the IMF, which is continuously asking for removing subsidies on power and petroleum products, he added. He explained that Pakistan would also receive funds from bilateral and multilateral sources if talks with the IMF remain successful.
The country has been in dire need of foreign exchange. The government took decision to increase duties on some of the imported products. Prime Minister Shehbaz Sharif imposed ban on import of non-essential items and luxury items to control dollar flight. Ban has been imposed on import of luxury vehicles and other non-essential items, including cosmetics. Decision was taken by the premier due to the widening trade deficit and, after holding a consultative meeting with his coalition partners, it was decided that the government will take tough decisions to stabilise the economy. Pakistan’s trade deficit has swelled to mammoth $39.3 billion in ten months (July to April) of the current fiscal year, putting pressure on the country’s foreign exchange reserves. Pakistan’s imports have gone up by 46.41 percent to $65.5 billion in July to March period of FY2021-22 from $44.7 billion in the same period of the previous year. Meanwhile, the country’s exports were recorded at $26.2 billion in July to April period of the year 2021-22 as compared to $20.9 billion in corresponding period of the previous year, showing growth of 25.5pc.