Rupee keeps falling as demand for dollars increases.
In the interbank market on Wednesday, the Pakistani rupee kept losing value versus the US dollar as local currency pressure from rising dollar demand persisted.
According to information provided by the State Bank of Pakistan, the local currency rose from yesterday’s close of 221.42 to 223.42 after falling 2 or 0.90% versus the dollar in the interbank market (SBP).
Although traders and dealers had anticipated the rupee to trade within a range of 218-19 in the coming days, the situation has quickly changed as the floods have overshadowed the International Monetary Fund’s (IMF) loan disbursement. The rupee’s depreciation follows a fluctuation in the demand and supply position of the greenback in the currency market.
Initial estimates place the economic damage caused by the severe floods in Pakistan at a staggering $10 to $12.5 billion, and the government also intends to drastically reduce the Public Sector Development Program (PSDP).
The local currency was generally stable last week as the market exhaled in relief at the arrival of a $1.16 billion loan tranche following the IMF’s decision to resurrect a rescue package for a cash-strapped nation.
Dr. Khaqan Hassan Najeeb, an economist and former adviser to the federal ministry of finance, stated in an interview with tv that the markets found solace in the fact that Pakistan’s programme with the IMF had resumed following the completion of the seventh and eighth reviews.
He observed that the program’s restart did allay concerns about a scenario that would be difficult to handle in the near future and gave rise to hope for unlocking money from other multilateral lenders and friendly nations.
The biggest flood to hit the economy in decades, he pointed out, forced the government to cut growth in half, to 2.3%, and hurt the economy.According to Najeeb, the damage to the cotton and rice harvests caused by the floods may reduce exports that had been projected to total roughly $36 billion and widen the current account deficit.
Other analysts brought up the same issue and predicted that the rupee would see some pressure as Pakistan moved to purchase more necessities following the floods in the nation.Other factors contributing to the rupee’s depreciation, according to Najeeb, include political unpredictability, a decline in trust, higher foreign exchange requirements (due to flood-related expenses, a backlog of letters of credit payments, and increased Afghan trade), and slower inflows.
The economist also pointed out that more orderly movement is required to prevent remittances from passing through unofficial routes in the vicinity of Rs 10 between the open market and interbank.There is currently more than Rs11 between open market and interbank rates, which is a significant discrepancy.
