KARACHI: The Pakistan rupee on Wednesday continued to trade at historic lows against the United State Dollar (USD) as 2021 draws to a close amid higher imports, analysts and traders said, projecting a less pessimistic outlook for the new year.
The rupee started the year at Rs160.39 in January this year compared to the greenback and closed at Rs178.24 on Wednesday in the interbank market, another historic low, recording a devaluation of over 11 percent or Rs17.85 since January 2021.
The currency appreciated to Rs152.39 against the greenback in May this year but in the latter half of the year higher imports, a Taliban takeover in Afghanistan and negotiations with the International Monetary Fund contributed to the rupee’s downslide, which lost value by around 17 percent or Rs25.85.
“Increasing CAD (current account deficit) due to higher imports coupled with rising international commodity prices and freight charges, uncertainty related to the IMF [loan] program and speculation led to the rupee’s depreciation,” Sana Tawfik, a banking sector analyst at Arif Habib Limited, told Arab News.
Pakistan’s current account deficit widened to a 40-month high at $1.91 billion in November 2021. The July-Nov current account balance turned into a $7 billion deficit as compared to a $1.8 billion surplus recorded last year, according to data released by the central bank.
Five month imports of the country stood at $29.9 billion as compared to exports of $12.3 billion, posting a trade deficit of $17.6 billion.
The higher demand for the greenback for import payments amid increasing global commodity prices, including of petroleum products and food items, kept the Pakistani rupee under pressure while the change of regime in Afghanistan compounded the situation as the flight of the dollar started from Pakistan to Afghanistan.
The Taliban took control of Kabul on August 15, 2021, after US forces withdrew from Afghanistan, leaving behind battered financial institutions. The situation took a turn for the worst after all official accounts of the Afghan government abroad were frozen.
“Afghanistan still depends on Pakistan for its import payments. Every month $300-$400 million worth of Afghanistan’s import are met through Pakistan due to bilateral trade in Pak rupee,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP), told Arab News. “Pakistan will be better off if the accounts of Afghanistan are unfrozen because there will be no pressure on Pak rupee.”
But Pakistani currency analysts expect rupee depreciation to slow down following international inflows during the first half of the next year.
“Over the next few quarters our foreign exchange outlook is less pessimistic,” Tawfik, said. “Am expecting the Pak rupee to remain within the range of 178-180 per USD till June 2022 with inflows expected from International Sukuk and IMF tranche followed by flows from ADB and World Bank.”
The south Asian country is expected to see a $6 billion IMF loan program revived at the next meeting of the fund’s executive board on January 12, 2022, which will also ease pressure on the Pakistan rupee.
Pakistan rupee continues slide to historic lows against greenback as 2021 draws to close
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Pakistan rupee continues slide to historic lows against greenback as 2021 draws to close
- Rupee was at Rs160.39 in January compared to greenback and closed at Rs178.24 on Wednesday in interbank market
- Change of regime in Afghanistan compounded the situation as flight of the dollar started to Afghanistan from Pakistan
Pakistan says it struck TTP, Daesh militant camps near Afghan border, Kabul alleges civilian deaths
- Islamabad says it targeted seven militant hideouts in “retributive response” to attacks
- Afghan Taliban accuse Pakistan of bombing civilians in Nangarhar and Paktika provinces
ISLAMABAD: Pakistan said on Saturday it carried out “intelligence-based selective targeting” against militant camps near the Afghan border after a series of attacks inside the country, while the Afghan Taliban accused Pakistani forces of killing civilians in the assault.
Pakistan has faced a renewed surge in militant violence in recent months, particularly in its northwestern Khyber Pakhtunkhwa province and two major attacks in the capital, Islamabad. Authorities say many of the attacks have been carried out by the Tehreek-e-Taliban Pakistan (TTP) and allied groups that Islamabad alleges are operating from sanctuaries in Afghanistan. Kabul denies this.
According to Pakistan’s information ministry, recent incidents included a suicide bombing at a Shiite mosque in Islamabad, separate attacks in Bajaur and Bannu, and another recent incident in Bannu during the holy month of
Ramadan, which started earlier this week. The government said it had “conclusive evidence” linking the attacks to militants directed by leadership based in Afghanistan.
“Pakistan in a retributive response, has carried out intelligence based selective targeting of seven terrorist camps and hideouts belonging to Pakistani Taliban ... and its affiliates and ISKP [Daesh] at the border region of Pakistan
Afghan border with precision and accuracy,” the Pakistani information ministry said in a statement on Feb. 21.
The statement, which did not specify the exact nature of the attacks, said it had hit camps of the “Fitna al Khwarij (FAK),” a term Pakistani authorities use for the TTP, as well as the Islamic State Khorasan Province (ISKP), the regional affiliate of the Daesh group.
Islamabad has repeatedly urged Afghanistan’s Taliban authorities to take action against militants it says are using Afghan territory to plan and launch attacks inside Pakistan. The latest statement said Kabul had “failed to undertake any substantive action” despite prior requests.
In an X post, Kabul government spokesperson Zabihullah Mujahid said Pakistani forces had violated Afghan territory.
“Pakistani special military circles have once again trespassed into Afghan territory,” Mujahid said. “Last night, they bombed our civilian compatriots in Nangarhar and Paktika provinces, martyring and wounding dozens of people, including women and children.”
The Afghan Taliban’s claims of civilian casualties could not be independently verified. Pakistan did not immediately comment on the allegation that civilians had been killed in the strikes.
Tensions between Islamabad and Kabul have escalated since the Afghan Taliban returned to power in 2021. Pakistan says cross-border militant attacks have increased since then and has accused the Taliban of failing to honor commitments under the 2020 Doha Agreement to prevent Afghan soil from being used for attacks against other countries. The Taliban deny allowing such activity and have previously rejected similar accusations.
Saturday’s exchange of accusations marks one of the most direct confrontations between the two neighbors in recent months and risks further straining already fragile ties along the volatile border.
