(MENAFN- Khaleej Times) The south Asian nation currency is expected to remain under pressure as the greenback is in high demand in the market due to uncertainty over political and economic crises The Pakistani currency lost 3.16 per cent of its value in the interbank market last week and closed at at all-time low of 208.74 against the US dollar (56.87 against the dirham) on Friday. — File photo by Muzaffar Rizvi
Published: Sun 19 Jun 2022, 5:10 PM
The Pakistan rupee will continue its losing streak against the US dollar and other major currencies this week amid uncertainty over revival of $6 billion IMF programme, widening current account deficit and shrinking foreign exchange reserves, experts say.
The south Asian nation currency, which shed 32.5 per cent of its value during the ongoing financial year 2021-22 ending this month, is expected to remain under pressure as the greenback is in high demand in the market due to uncertainty over political and economic crises.
Analysts and forex dealers said the rupee is losing ground mainly due to the balance of payment crisis and fast-depleting foreign exchange reserves. They said local banks have run out of dollars and are now borrowing from various sources, including their own depositors, to ensure trade related payments for their clients.
Bearish trend continues
The Pakistani currency lost 3.16 per cent of its value in the interbank market last week and closed at at all-time low of 208.74 against the US dollar (56.87 against the dirham) on Friday. The rupee, which ended in negative column during the past six consecutive days, traded above 212 to a dollar in the open market as the importers were keen to buy the greenback to clear their imports bills by June 30.
“With depleting foreign exchange reserves at below $9 billion, the central bank is not in a position to intervene in the market. It has stopped selling dollars into the market nearly a month ago and is now monitoring the situation to bring stability in the rupee-dollar parity,” according to an analyst.
During the week ended June 17, liquid foreign exchange reserves held by the State Bank of Pakistan (SBP) dropped to $8.98 billion. The commercial banks' forex reserves also declined to $5.95 billion pushing the total reserves of the country to $14.94 billion.
IMF deal is a must
Samiullah Tariq, head of research at Pakistan Kuwait Investment, said the rupee will remain under pressure until the country sign a deal with the International Monetary Fund (IMF) to revive its extended fund facility.
“The rupee-dollar parity will only improve with the resumption of foreign exchange inflows and it is linked with the revival of IMF's programme. The IMF deal will not only restore confidence of investors but also bring stability in the market,” Tariq told Khaleej Times on Sunday.
Pakistan is seeking to secure a staff-level agreement with the IMF in June to unlock the remaining $3 billion from its $6 billion extended fund facility signed in 2019. It has also requested to increase the loan size by $2 billion and extend the loan period until June 2023..
Another analyst said the IMF has asked Pakistani officials to take 'additional measures' to strengthen the federal budget announced on June 10 and bring it in line with the key objectives of the fund programme.
“The rupee is expected to stay volatile in June and unlikely to reverse the trend during the ongoing financial year,” he said.
Uncertain situation weighs
Ghazanfar Bilour, a senior leader of Businessman Forum and former president of Federation of Pakistan Chambers of Commerce and Industry, expressed serious concerns over the deteriorating economic situation and said that an uncertain situation is prevailing in the country. He said devaluation of Pakistani currency, rising tariffs of electricity and gas as well as increasing petroleum products' prices will play havoc with the economy.
“The rupee is depreciating, prices of petroleum commodities are on the rise while trade deficit, circular debts along-with electricity and gas crises deepening with each passing day. A severe stagnation was witnessed in industrial growth, whereas a remarkable decline also registered in the country's exports as well as import,” he noted.
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