KARACHI: The Pakistani rupee on Tuesday plunged to another all-time low at Rs 169.97 against the United States dollar, mainly due to rising demand for imports and the flight of the dollar to Afghanistan, dealers and analysts said.
The rupee lost 37 paisas, or 0.22 percent of its value, against the greenback as the demand for the dollar continued to build pressure. The rupee was trading at Rs 171.80 for selling and Rs 171.50 for buying in the open market on Tuesday.
Since May, the rupee has dropped in value by over 11 percent against the dollar, when the currency was trading at around Rs152 per dollar. In the current fiscal year, the rupee has lost 7.31 percent in value.
“The rising import bill and flow of dollars to Afghanistan is continuously building pressure on the national currency, which has depreciated by 5.96 percent during the calendar year,” Samiullah Tariq, Director Research at Pakistan Kuwait Investment, told Arab News.
Pakistan’s imports in recent months have increased far more than the country’s exports which has led to an increase in the trade deficit by 120 percent to $7.49 billion in the first two months of the current fiscal year.
Historic growth in imports in the July-August 2021 period has swelled the country’s Current Account Deficits by $2.3 billion as compared to a surplus of $838 million last year.
Last week, Pakistan’s central bank had restrained consumer financing through changes in Prudential Regulations (PRS), expecting that the measure would moderate import and demand growth.
“There is no immediate impact of the central bank’s measure though it is expected in the coming days,” economist Muzzamil Aslam said. “Current pressure on the rupee is due to high imports”.
However, Tariq said the ‘natural stabilizer’ or ‘shock absorber’ phenomena would cool down costly imports because “due to higher prices the demand of imported goods will decline automatically.”
Pakistani currency dealers said foreign inflows to Afghanistan had been suspended since the Taliban took control of Afghanistan last month, creating extra burden on the forex position of Pakistan.
“Every day an estimated $4-5 million is going to Afghanistan from Pakistan,” Zafar Paracha, the general secretary of the Exchange Companies Association of Pakistan, told Arab News. “Flight of capital from Afghanistan is taking [place] through Pakistan and that is also exerting pressure on Pak rupee because of the huge demand for dollar. The previous regime in Afghanistan would receive around $500 foreign inflows on a weekly basis mainly for salaries and other public and private expenses”.
Analysts said increasing prices of commodities in the international market, substantial increase in freight charges, and upcoming foreign debt payments were also exerting pressure on the Pakistani currency.
