KARACHI: The Pakistani currency saw a sharp decline on Tuesday – the first day of the interim government taking over the reins of power at the Center – and closed at a three-month low of 292 rupees against the US dollar.
Around noon, the local currency fell by Rs 3 against the greenback in the interbank market. The decline was in line with market speculation that the country’s currency would face a new round of depreciation.
Earlier, the currency remained stable at around Rs 288 against the greenback during the last three months.
Speculation was rife that the currency would depreciate under the International Monetary Fund’s (IMF) $3 billion loan program at the end of June 2023. In order to save political capital, he ruled and abandoned the supervisory setup.
Market talk further points out that the rupee was set to fall following the government’s decision to lift all restrictions on imports that were previously controlled to manage the country’s dwindling foreign exchange reserves.
Despite a brief appreciation of the Pakistani rupee against the US dollar following the IMF agreement and capital inflows from friendly countries, the currency has weakened again, from pre-deal levels of Rs 285 and Rs 290 to the dollar. has returned between
The decline came even as the State Bank’s foreign exchange reserves doubled within a month, indicating that these factors alone were insufficient to strengthen the rupee. The easing of import restrictions has boosted demand for the dollar, which is likely to put pressure on the local currency.
Moreover, the rupee’s interbank rate is closer to the open market rate, suggesting the increasing influence of market forces in determining the rupee’s value – a shift that is in line with the IMF’s demands.
At the same time, oil prices have risen, with Brent crude, the international benchmark, hitting $84 a barrel, down from $75 a barrel in early May. Given strong demand and tight supply, prices may remain high in the future.
The rupee hit an all-time low of 299/$ in May after high political drama and law and order situation peaked.
Later, it recovered to around 275/$ in July as a result of the IMF loan program.
