rupee free slide continues for sixth session in a row
As the nation continues to experience an economic damage brought on by severe flooding, the Pakistani rupee continued to depreciate against the US dollar on Friday for the sixth consecutive session.The local unit dropped in value from yesterday’s closure of 225.42, when it lost Rs2, to today’s close of 228.18, after losing 2.76 in the interbank market (SBP).
Since the start of this week’s trade, the Pakistani rupee has depreciated against the dollar by 9.21 percent, or 4.2%, and appears to be following the same trajectory as when it hit 239.37 on July 28. According to currency dealers, the pressure on the rupee is caused by a lack of dollars in the market because demand for the currency has increased since the government lifted the import ban on luxury goods.
They also pointed out that, similar to the growth in imports, remittances and exports did not rise to the necessary level, disrupting the dollar’s supply-demand equilibrium.In addition to this, the dollar’s global strengthening is causing it to appreciate against the rupee. After reaching a high of 110.79 on Wednesday, a level not seen since June 2002, the US dollar index, which compares the value of the dollar to six significant rival currencies, rose 0.04% to 109.73.
Political irrationality, a drop in investor confidence in the economy, higher foreign cash needs (due to flood-related costs, a backlog of letters of credit payments, and increased Afghan trade), and slower inflows are further reasons contributing to the rupee’s depreciation.The cost of damage and destruction brought on by the floods in Pakistan is greater than the amount of money disbursed as a loan by the International Monetary Fund (IMF).
According to preliminary estimates, Pakistan’s devastating floods have cost the country between $10 and $12.5 billion in economic losses. At the same time, the administration plans to substantially cut the Public Sector Development Programme (PSDP).
The restart of the IMF loan programme, according to analysts, did relieve worries about a situation that would have been difficult to handle in the near future and gave rise to hopes of raising money from other multilateral lenders and friendly nations.
Economic growth is anticipated to slow down as a result of the worst floods to batter the country in decades. Standing cotton and rice harvests have been harmed by the extensive flooding, which will also lower exports and exacerbate the current account deficit for the nation.
The need for rescue and aid has become urgent due to the widespread destruction, for which the government has been purchasing more necessities.The State Bank of Pakistan reversed its decision to permit exchange companies to export US dollars to the foreign market, and as a result, the rupee has recovered, a currency dealer told The News.
The need by the Civil Aviation Authority (CAA) that all foreign currency owned by arriving foreign passengers be disclosed will further the pressure currently being put on the rupee.A declaration form with details concerning local and foreign currency must be filled out and delivered to airline employees in compliance with the CAA’s notification.
The restriction was implemented in order to follow the Financial Action Task Force (FATF) recommendations.Travelers are currently hesitant to bring in foreign currency. Since August 15, when the central bank permitted the export of US cash, exchange companies had exported almost $7 million.
