The rupee continued to lose ground against the US dollar on Thursday, as the greenback reached an all-time high of Rs192 in the interbank market.
According to the Forex Association of Pakistan, the dollar breached the 191-mark at the day’s start and soared to Rs192.20 around 11:45am, appreciating by Rs2 from the previous day’s close of 190.20 — the record high value for the dollar before today’s session.
Asad Rizvi, the treasury head at Chase Manhattan Bank, told Mettis Global — a web-based financial data and analytics portal — that the Pakistani rupee had depreciated by nearly nine per cent against the dollar since the time of the Russian invasion of Ukraine to “hit all-time new lows”.
He further pointed out that the economic slowdown and higher oil prices as a result of the Russian offensive had also dented other currencies, including the Indian rupee, and accelerated inflation. And there was “no respite in sight”, he said.
This freefall of the rupee against the dollar has also been attributed to the country’s high import bill as well as delay in the release of a $1 billion tranche by the International Monetary Fund.
A Private report on Wednesday said the rising exchange rate had rattled the economy.
The rupee had been losing its value mainly because of an uncontrolled rise in imports and a relatively slower pace of growth in exports. This was reflected in the trade deficit, which reached $39 billion in July-April.
Currency dealers said higher demand for dollar was the key reason for the bullish trend in the currency market. Political foot-dragging by the incumbent government on the reversal of fuel and electricity subsidies — a prerequisite for the resumption of the loan programme by the International Monetary Fund — had further eroded the confidence of stakeholders.
The day-to-day devaluation of the local currency could cause a serious panic-like situation as investors are found clueless. The rising inflation and the devaluation of the local currency mean declining purchasing power of consumers as traders ask for higher profits to save their investments.
Currency experts and dealers fear that the rupee will fall more rapidly in the coming days unless and until inflows from anywhere appear on the horizon.
Currency dealer Zafar Paracha has termed the situation “dangerous” and fears that in light of the growing demand of dollar, the greenback’s value may reach Rs200 soon.
Meanwhile, Malik Bostan, chairman of the Forex Association of Pakistan, said the interbank market was “more unsettled” than the open market, and this had led to an increase in the demand for the dollar.
Moreover, he said individuals intending to go for Haj were buying dollars due to a shortage of the Saudi riyal and this had resulted in a rise in the dollar’s value in the open market as well. But, he believed that this increase in the greenback’s demand was transient.
He was hopeful that the International Monetary Fund agreeing to increase the size of its $6 billion loan programme by $2bn — a possibility that the international moneylender has made conditional to the complete reversal of energy subsidies introduced by the ousted PTI government — would lead to the rapid recovery of the rupee.
However, the government has so far remained undecided about the reversal of these fiscally unsustainable subsidies.
Importer and former president of Karachi Chamber of Commerce and Industry Abdullah Zaki, meanwhile, decries growing difficulties in the aftermath of the dollar’s rise.
He told Private Channel that the price of imported commodities had increased and eventually, end consumers would have to bear its consequences.