The Pakistani rupee extended its downward trend on Friday with the local currency depreciating by more than 12 rupees against the US dollar in the interbank market as the government released a tranche of pending loans to the International Monetary Fund (IMF). reduced its control over the currency to agree to
The local unit was trading at Rs 268.30 against a close of Rs 255.43 in the interbank market on Thursday.
The interbank market has gained Rs 30.41 since Thursday as forex companies removed the exchange rate ceiling – a key demand of the IMF under the bailout program agreed to in 2018.
The rupee fell to 265 against the dollar in the open market, down by Rs 3 from the previous day, according to rates provided by ECAP.
A market-driven exchange rate is one of the key requirements set by the IMF to restart the stalled bailout program.
Finance Minister Ishaq Dar’s efforts to defend the rupee since his appointment in September, including a reported intervention in the currency market, went against the advice of the IMF.
A day earlier, the rupee fell by 24.11 in the interbank market, falling to Rs 255.43 against the dollar. The 9.6% decline is the second-biggest decline in a single session.
The previous low of Rs 239.94 was recorded on July 28, 2022, when Pakistan’s long-struggling economy was further weakened by political chaos and devastating floods.
Facing an acute balance of payments crisis, Pakistan is desperate for external financing with less than three weeks’ worth of import cover in its foreign exchange reserves, according to the latest data. $923 million fell to $3.68 billion.
Pakistan received a $6 billion IMF bailout in 2019. It added another $1 billion last year to help the country after devastating floods, but the IMF then suspended payments in November because of Pakistan’s lack of progress on fiscal stabilization.
In 2019, former Prime Minister Imran Khan’s government mediated a multi-billion dollar loan package from the lender of last resort.
But the economy slid backwards after Khan reneged on his promise to reduce subsidies and market interventions that had eased the cost-of-living crisis.
Prime Minister Shehbaz Sharif, who ousted Khan in a no-confidence vote last spring, is also reluctant to meet the terms of the loan amid declining popularity.
Exchange Companies Association of Pakistan president Zafar Paracha told the cap was lifted on Wednesday “in consultation with the State Bank”.
