In continuous freefall, Pakistani rupee hits 154 in the open market

KARACHI: Pakistan’s currency on Tuesday continued its free fall for the fourth straight trading day in the interbank and open markets by hitting 153.50 and 154 against the dollar respectively, following a “market-determined” rate for the rupee demanded by the International Monetary Fund as a condition for a recently signed bailout package.
The sliding rupee has caused alarm in Pakistan, which is already facing inflation likely to average over 7 percent for the year and surging costs for fuel and power, which are both heavily influenced by the dollar exchange rate.
The latest drop in the exchange rate follows a new financial assistance package announced by the IMF on May 12, which has eroded the value of the rupee by 8.5 percent. This is Pakistan’s 13th IMF bailout. 
The Pakistani currency has also depreciated by Rs0.50 to Rs40.70 against the Saudi Riyal and Rs0.40 to Rs41.50 against the Arab Emirate Dirham. 
“We were expecting that the rupee would hit 153 by the end of current year but that level has been achieved much before,” said Samiullah Tariq, the head of Research at Arif Habib Limited. “There is too much volatility in the market and we are unable to understand what is on their (government’s) mind.” 
“The buying activity in the open market is comparatively low amid high demand for the greenback,” said Malik Bostan, the president of Forex Association of Pakistan. “A panic-like situation can be seen in the interbank market.”
On Monday, Pakistan’s central bank raised its key interest rate by 150 basis points to 12.25% on Monday, citing inflationary pressures, exchange rate depreciation and an elevated fiscal deficit
Pakistani traders believe the interest rate hike coupled with the devaluation of the rupee will drive many Pakistani industrialists out of business.
“The government is implementing the IMF’s terms before the deal is even signed,” opposition Pakistan Peoples Party senator Sherry Rehman said in a statement on Tuesday. “This is also evident in the unabated increase in the dollar rate which has seen the rupee plummet to Rs. 152 in the open market.”
The IMF agreement still needs to be ratified by the Fund’s board in Washington. 
“All this devaluation is going to make paying back our debt an onerous task,” Rehman said. “It appears that the government is nothing more than a silent spectator in front of the IMF. Every step it is taking seems to be an effort to please a few. Its haphazard decisions are wrecking the economy.”
At present, the Pakistani currency, which many analysts consider overvalued, is managed by the central bank in a de facto controlled float.
The State Bank of Pakistan said on Tuesday it was watching the foreign exchange market closely and would act in the case of “unwarranted” volatility.
It said the recent slide “reflects the continuing resolution of accumulated imbalances of the past and some role of supply and demand factors.”