Rupee continues to fall against dollar

• The rupee lost another 47 paisas against the dollar in the interbank foreign exchange market.
• Dealers attributed the decline to a deadlock in talks between Pakistan and the IMF.
• The local currency remained under pressure since the start of the current fiscal year.

KARACHI: The rupee continued to fall on Tuesday and lost another 47 paisas against the dollar in the interbank foreign exchange market, dealers said.

The local currency fell to Rs227.88 to the dollar, compared with Rs227.41 a day ago.

The dealers attributed the decline to a deadlock in talks between Pakistan and the International Monetary Fund (IMF). The deadlock caused panic in the market, besides foreign inflows from other sources were also stuck up, they added.

The rupee witnessed a record low of Rs239.94 against the dollar on July 28, 2022.

The local currency remained under pressure since the start of the current fiscal year due to the constant decline in the foreign exchange reserves of the country.

Besides, Pakistan’s official foreign exchange reserves fell to an alarming level of $5.57 billion by the week ended December 30, 2023.

The official foreign exchange reserves of the State Bank of Pakistan (SBP) fell $245 million to $5.577 billion by the week ended December 30, 2022, compared with $5.822 billion on December 23, 2022.

The foreign exchange reserves held by the central bank witnessed a record high of $20.146 billion by the week ended August 27, 2021. Since then, the official forex reserves of the SBP dropped $14.569 billion.

Plummeting foreign exchange reserves, amid high debt servicing obligations, is likely to exert considerable pressure on the rupee.

The recent pressure on the local currency may also be attributed to relaxation in imports.

The SBP recently lifted the prior condition to open the letters of credit (LCs) by the banks for import proceeds.

The government imposed restrictions on opening the LCs in May 2022 to control the balance of payments and prevent outflows of the foreign currency.

Imports recorded a 32 per cent decline to $5.16 billion in December 2022, compared with $7.58 billion in the same month of 2021, according to the data released by the Pakistan Bureau of Statistics.

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