Rupee free fall continues, hits record low of Rs 224.92

KARACHI: The Pakistani rupee declined Rs 2.93 on Wednesday to reach the historic low level of Rs 224.92 against the dollar as uncertainty prevailed on the economic and political front.

The local unit shed Rs 2.93 to close at Rs 224.92 to the dollar from Tuesday’s closing of Rs 221.99 in the interbank foreign exchange market.
Currency experts said that Pakistan is going through one of its worst political and economic crises where the investors and traders remained under pressure resulting in panic buying of the dollar for import payments.

The country’s foreign exchange reserves are exhausted on the back of rising import bills compared with reduced exports and uncertain political situation which proved to be a major factor in pushing the rupee to the fresh historic low, they added.

Coupled with the bleak economic indicators, the political upheaval added fuel to the already chaotic conditions of the country. With the future of the coalition government hanging by a thread, the traders and investors speculate further delay in the International Monetary Fund (IMF) programme and other loan agreements with friendly countries and multilateral lenders.

Global rating agency Fitch has also downgraded Pakistan’s outlook to negative from stable, while affirming its long-term foreign-currency (LTFC) issuer default rating (IDR) at B-.

Fitch Ratings said that the revision of the outlook to negative reflects a significant deterioration in Pakistan’s external liquidity position and financing conditions since early 2022.

The dwindling foreign exchange reserves of the country also kept the market under pressure. Pakistan’s total liquid foreign exchange reserves dropped $132 million to reach $15.611 during the week ended on July 7, compared with $15.742 billion on June 30.

The SBP’s reserves declined $99 million to $9.717 billion during the week ended on July 7, compared with $9.816 billion during the previous week. Similarly, the net foreign reserves held by commercial banks were also down $33 million to $5.893 billion.

The current account deficit remains one of the key challenges for the stability of the rupee, as after moderating in the previous three months, it rose to $1.4 billion in May, on the back of lower exports and remittances partly due to the Eid holiday.

The trade deficit rose to $4.8 billion in June, more than $1.7 billion higher than its February low. While non-energy imports have continued to moderate in the last three months on the back of curtailment measures by the government and the SBP.

The total trade deficit of the country escalated to $35.52 billion in the first nine months (July-March) period of the current fiscal year against $20.8 billion in the same period last fiscal year.

The local currency remained under pressure since the start of the current fiscal year. The rupee lost Rs 20.07 or 9.79 per cent from Rs 204.85 to dollar on June 30, 2022 to the current level of Rs 224.92.

At the open market, the buying and selling of the dollar was recorded at Rs 224 and Rs 227 at 4:30 pm PST.