Pakistani rupee slips to record low amid political uncertainty, Russian invasion of Ukraine

KARACHI: The Pakistani rupee on Monday plunged to a new all-time low of Rs181.25 against the US dollar, currency traders and analysts said, pointing to political uncertainty at home and global price instability since the Russian invasion of Ukraine as the major factors behind it. 
Pakistan’s Prime Minister Imran Khan is facing an uncertain future as the opposition alliance seeks to overthrow him through a vote of no-confidence, which the country’s parliament will take up on Friday. 
Opposition parties accuse PM Khan of mismanaging the economy and foreign policy, and poorly governing the country. The prime minister has also been hit by over a dozen defections by his party’s lawmakers. 
On Monday, the US dollar closed at Rs181.25, with the rupee depreciating 0.38 percent from Friday’s close of Rs180.57. The Pakistani currency has lost its value by 15.05 percent or Rs23.71 against the greenback during the current fiscal year, while it has depreciated 2.7 percent or Rs4.74 so far in 2022, according to the Pakistani central bank’s data. 
“Political instability and the fear of violence following mass gatherings of various party workers in Islamabad is exerting a negative impact on the Pakistani rupee, which is trading at an all-time low,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan (ECAP), told Arab News. 
“Any violence would lead the country to greater instability and exert more pressure on the national currency. Parliamentary issues must be settled in parliament.” 
Analysts attribute the current depreciation to depleting foreign exchange reserves of the country and rising interest rates of government securities. 
“The rupee is under pressure due to the falling reserves of the country and increase in the interest rate of government securities — Pakistani investment bonds,” Abdul Azeem, the head of research at the Karachi-based Spectrum Securities brokerage house, told Arab News. “The reserves are falling at a rate of around $300 million per week.” 
During the week ending on March 11, Pakistan’s foreign reserves decreased by $381 million to $15.8 billion. The total liquid foreign reserves held by the country stand at $22.3 billion, according to the central bank data. 
The Russia-Ukraine conflict is also playing a major role in the rupee’s instability as the global commodity prices continue to remain at the higher side. 
“High commodity prices, including the oil price, are one of the key factors that is pushing the demand for dollar high,” Samiullah Tariq, research director at the Pakistan-Kuwait Investment Company, said. 
“The flight of capital toward safe havens is also exerting pressure on Pakistani rupee, but the trade numbers have improved in February and are expected to post better growth in March.” 
From July 2021 to February 2022, Pakistan’s exports totaled $20.56 billion against $16.32 billion during the corresponding period of the last year, recording an increase of 25.95 percent. 
The imports totaled $52.50 billion against $33.86 billion during the same period of the previous year, showing an increase of 55.07 percent, according to the Pakistan Bureau of Statistics.