Rupee breaches 211-a-dollar barrier due to the delay in revival of the IMF programme

Rupee breaches 211-a-dollar barrier due to the delay in revival of the IMF programme

WEBDESK: Despite Finance Minister Miftah Ismail’s claim that the International Monetary Fund (IMF) programme will be revived within the next two days, Rupee breaches 211-a-dollar barrier due to the delay in revival of the IMF programme.

The Pakistani rupee remained highly volatile and continued its losing streak against the US dollar on Tuesday, losing Rs2 in the interbank market.

The US dollar closed at Rs211.48, up Rs2, or 0.72 percent, against Monday’s record high of Rs209.96, according to the State Bank of Pakistan (SBP).

Apart from the delay in the revival of the IMF programme, the rupee continued its downward trend, which has been attributed to quarter-end payments due to the country’s rising import bill, widening current account deficit, and depleting foreign exchange reserves.

The rupee’s value against the greenback has been falling since the beginning of the week, as traders resorted to panic buying in response to reports that some commercial banks were running out of foreign currency.

Business leaders have urged the State Bank of Pakistan (SBP) to play its part in halting the rupee’s depreciation. The central bank, on the other hand, appears helpless to control the situation because it is unable to supply dollars in the market to support the rupee because its own dollar stock is depleted.

Pakistan’s foreign exchange reserves (held by the SBP) have dwindled to dangerously low levels, with less than six weeks’ worth of import cover remaining. Currently, the reserves are less than $9 billion.

To avoid defaulting on international payments, the country is meeting the prerequisite conditions for reviving the IMF loan programme.

The rupee has dropped by a massive 34.23 percent (or Rs53.94) since the start of this fiscal year (July 1, 2021) compared to the previous fiscal year’s close of Rs157.54.

For the past 13 months, the rupee has been on a downward trend. In comparison to the all-time high of Rs152.27 in May 2021, it has lost 38.88 percent (or Rs59.21) to date.

“The currency will continue to fall until Pakistan is able to reach an agreement with the International Monetary Fund (IMF) at the staff level,” AA Commodities Director Adnan Agar told a private TV Channel earlier.

Investor confidence, according to the analyst, is completely shattered, which can only be bolstered by positive developments on the IMF front.

Depleting foreign exchange reserves, according to Agar, has triggered panic buying, giving speculators a chance to play with the greenback’s demand and supply.

SBP tightens controls

Commercial banks have been asked to seek permission from the central bank before initiating import transactions worth $100,000 in order to alleviate dollar shortages and conserve eroding foreign exchange reserves amid IMF loan uncertainty.

Previously, banks were required to notify the SBP if they wanted to begin processing trade documents such as letter of credits (LCs), other papers, and making payments for imports of certain goods valued at $500,000,” a banking source familiar with the development told The Press.

“It appears the central bank wants to discourage imports in order to save money, as banks are facing a dollar shortage due to a sharp depletion of foreign currency reserves,” the source added.

The central bank’s reserves decreased by $241 million.

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