Pakistani rupee falls for 12th consecutive day

KARACHI: On Monday, the Pakistani rupee fell for the 12th consecutive working day, hitting a new all-time low of Rs200.93 versus the US dollar, amid rising political and economic unrest in the country.

Following rumours that Doha talks on resuming the IMF (International Monetary Fund) loan programme may be postponed by a few days or weeks, another decline in the native currency is possible.

To boost the currency against the greenback, the State Bank of Pakistan (SBP) increased the benchmark interest rate by 150 basis points to 13.75 percent on Monday.

According to central bank data, the Pakistani rupee fell 0.39 percent to Rs200.93 against the dollar during the Doha negotiations, compared to Friday’s close of Rs200.14.

With this new depreciation, the native currency has decreased by a substantial 8.21 percent (or Rs15.24) in the last 12 working days.

It has remained under strain as the country’s foreign exchange reserves have rapidly depleted due to increased import payments and foreign loan repayments.

The country’s foreign exchange reserves have fallen to a catastrophic low of $10.2 billion, which is just enough to support six weeks of imports. Since January 2022, the reserves have rapidly decreased, falling to $10.2 billion.

Islamabad has two months (May and June) to repay $4.5 billion in foreign debt, while import bills are expected to remain high in May due to the authorities’ decision to purchase expensive liquefied natural gas (LNG) to address the country’s energy issue.

The risk of failure on international payments has grown due to insufficient reserves and a likely modest delay in the resumption of the IMF $6 billion loan programme.

The IMF had tied the renewal of its multibillion-dollar loan programme to the elimination of petroleum and energy subsidies. In order to avoid a new high wave of inflation, the PML-N coalition administration chose not to pass on the increase in international oil prices to end customers.

If the government decides to raise energy costs, experts predict that inflation will rise to 15% or higher.

Market speculation suggests that a technocrat-led government will be installed in the centre to make difficult economic decisions, such as cutting energy subsidies, and resurrect the IMF loan programme, as Prime Minister Shehbaz Sharif has struggled to gain consensus from his allies.

The IMF program’s reinstatement would aid the rupee’s partial recovery against the dollar.