Amidst the persisting Pakistan-International Monetary Fund (IMF) negotiations, the country’s currency endured continued pressure, marking its fifteenth consecutive working day slide, hitting a seven-week low near Rs287.50 against the US dollar in the inter-bank market.
State Bank of Pakistan (SBP) reported a fresh decline, with the Pakistani currency slipping by 0.18% to close at Rs287.55 against the dollar, resulting in a cumulative 3.72% loss or Rs10.72 over the past 15 working days.
Exchange Companies Association of Pakistan (ECAP) revealed a 0.34% decrease in the open market, dropping the currency to Rs289 against the dollar. Zafar Paracha, General Secretary of ECAP, attributed the pressure on the currency to importers securing dollars in preparation for potential outcomes from the ongoing IMF review of Pakistan’s economy.
Paracha clarified that despite this pressure, there’s widespread expectation for a positive outcome in the ongoing Pakistan-IMF discussions regarding the next tranche of the $710 million loan. Market discussions suggest that the central bank is actively purchasing US dollars to bolster the country’s foreign exchange reserves, currently at a low of $7.5 billion, insufficient for even two months of import cover.
This surge in the central bank’s dollar purchases has amplified the demand for foreign currency, further straining the local currency. Additionally, geopolitical tensions in the Middle East are impacting regional and global currencies against the dollar, potentially inflating import costs.
The resurgence of black currency markets in Peshawar, near the Afghan border, is also influencing the rupee’s performance, necessitating intervention to curb these illegal markets. Exporters have withheld selling dollars, anticipating further rupee depreciation for more favourable rates later.
Despite positive indicators such as increased remittances in October and a slight rise in foreign exchange reserves, the currency market largely overlooked these developments. The prolonged currency strain continues amidst ongoing geopolitical uncertainties and economic negotiations.
Published in The Express Tribune, November 14th, 2023.