Pakistani rupee’s retreat entered its third day in the interbank market as traders pinned this downtrend to lean foreign exchange reserves amid rising imports, while the decline was also attributed to a delay in the funding from the International Monetary Fund (IMF).
According to data from the State Bank of Pakistan (SBP), the local currency decreased by 0.02% from Tuesday’s finish of 224.11 to settle at 224.16 against the US dollar in the interbank market.
Due to decreasing foreign exchange reserves and a rising external funding gap, sentiment in the currency market has remained negative. Even while the current account deficit is decreasing as a result of currency depreciation and other tightening measures, repayment of external debt remains the largest concern.
Moreover, investors are closely monitoring any changes from the International Monetary Fund (IMF). The government hasn’t satisfied the requirements to complete the ninth assessment of the bailout package, thus the next $1 billion tranche has been delayed.
Federal Minister for Finance and Revenue Ishaq Dar claimed last week that Pakistan met all targets for the review. However, the IMF resident chief said discussions with the Pakistani “authorities are ongoing, especially as not all end-September quantitative targets have been met”.
In a significant development, the Finance Division rejected claims that Pakistan is experiencing an “economic emergency” on Tuesday, claiming that those spreading such statements do not want the country to prosper.
The statement mentioned that the message is “unfortunately aimed at creating uncertainty” about the economic situation in the country and can only be spread by those “who do not want to see Pakistan prosper”.
Despite the rupee’s approximately 21% decline against the greenback so far in 2022, there is a lot of uncertainty surrounding the Pakistani currency. Pakistan has a market-based currency rate regime as of 2019.
The black market exchange rate is currently trading at a premium of more than 10% at Rs240-250, despite the fact that it has previously stayed in the Rs221-225 area.
Except for a few currencies available to travelers at a premium of 3%, there is scarcely any foreign currency supply in that market as a result of the central bank’s strict regulations for exchange companies.
The black market’s rise has had a significant negative impact on dollar inflows, notably remittances abroad. By June 2023, analysts predict that the rupee will hit 270 versus the US dollar.
