ISLAMABAD (Eshfak Mughal) :-The Pakistani Rupee further dropped to a new all-time low of Rs224.92 against the US dollar in the inter-bank market on Wednesday due to prevailing political volatility and the policy of free movement of currency.

The rupee further down by Rs2.99, or 1.30%, in a single day to hit an all-time low at Rs224.92 from Rs.221.99 recorded a day earlier, the data released by the State Bank of Pakistan (SBP) showed.

Analysts attribute the fresh depreciation to the political uncertainty that triggered due to the results of by-elections in Punjab province and said the currency market came under pressure due to the latest development in the political front.

Finance Minister Miftah Ismail blamed political uncertainty for the massive depreciation of PKR against the US Dollar.

In a phone interview with Bloomberg, Miftah said that Pakistan is fine in terms of the real economic fundamentals, but the political uncertainty screwed up us.

Miftah said that the economy’s roots had “strengthened” over the last four months despite political instability.

Former Spokesman of Finance Ministry and renowned Economist, Dr Khaqan Najeeb said that ongoing free fall of PKR against US Dollar is due to market-determined exchange rate system in the country. He said that trade deficit and market influencing news make a lot of impact on currency changes in this regime.

Recent adjustment of PKR is partly influenced by uncertainty due to election results coupled with Fitch downgrade news, he added.

But there’s another important factor, the payments of LCs from the high level of imports in June 2022, for energy in particular, Najeeb said.

While elaborating the reason of high deman of US Dollar in inter bank, he said that commercial banks do not cover LC payments on opening but completely cover them at the time of getting the flows. With the pronounced PKR slide, financial institutions tried to cover import payments.

With slipping of local currency against US greenback, the exporters held their proceeds for a better rate in future. Market equilibrium got disturbed putting pressure on the local currency.

He said that the State Bank can smooth the disorderly movement but limited Foreign Exchange position as well as bindings of international considerations constrained of the SBP.

The former spokesman of the FM further said that the IMF factor continued adherence to a market-determined exchange rate amid free fall of local currency.

On a question to manage dollar against PKR, Najeeb said that the country should improve exports and decrease import bill and SBP should also smoothly disorderly movement. The country must has conserve energy to reduce energy import bill.

On the other hand, the International Monetary Fund (IMF) wants to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure the country does not have a funding gap after the IMF loan.

According to a report, Saudi Arab may also transfer its prescribed loan quota in IMF to Pakistan.

With the current economic situation in Pakistan, this matter has become crucial as the amount to be received from the IMF would be insufficient for government to protect the country from defaulting.

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