KARACHI: Pakistani currency maintained its journey towards south, as it lost another 0.74% (or Rs1.51) and touched a new all-time low at Rs203.38 against the US dollar in the inter-bank market on Monday due to renewed uncertainty about the revival of IMF loan programme.
The rupee hit an intra-day low at Rs204.50 against the greenback before partly recovering later, according to market sources.
It had closed at Rs202.35 on Friday, according to the central bank.
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It was the second consecutive day of free fall for the rupee. Cumulatively, the currency has dropped 1.54% (or Rs3.09) in the two days.
In his latest statement, Finance Minister Miftah Ismail said on Saturday there had been no progress yet on the IMF programme, as the lending institution may have some objections to the federal budget 2022-23 presented in the National Assembly on Friday.
Earlier, the minister had said the IMF programme was expected to be resumed after the budget. The revival of the IMF programme is a must to avoid a Sri Lanka-like default situation.
The renewed uncertainty came despite China’s assurance to roll over a maturing debt of $2 billion. Islamabad was scheduled to repay $2 billion to Beijing in the current month.
The country’s foreign exchange reserves have depleted to a critically low level of six weeks of import cover at $9.2 billion.
A boost in the reserves is necessary to stabilise the rupee and avoid the worsening of balance of payments crisis.
“Pakistan is expected to reach the staff-level agreement with IMF sometime around the third week of June…to resume the loan programme,” MBA Capital Executive Director Saad Hashemy said while talking to the Express Tribune.
The prolonged delay in the revival of the IMF programme has, however “weakened the rupee…over and above its fair value,” he said.
The real effective exchange rate (REER) – the value of the rupee against the basket of currencies of foreign trading partners – may have depreciated to around 90 on the index at the current rupee-dollar parity.
The central bank used to maintain it around 96-97 on the REER index when the currency stood stable. “The REER projection at current rupee-dollar parity suggests a fair value of the domestic currency stands at around Rs190 against the US dollar,” he said.
The revival of the IMF programme on the cards and rollover of Chinese debt of $2 billion would provide the much-needed support to the rupee against the US dollar and the basket of currencies of global trading partners, he said.
In addition to homegrown issues and delays in IMF programme, Hashemy said, the rupee has come under mounting pressure in the wake of global economic slowdown and high global commodity prices – mainly petroleum product prices.
