KARACHI: Pakistan’s ongoing political crisis and dwindling foreign exchange reserves continued to haunt the national currency on Wednesday, making it hit another historic low of Rs186.13 against the US dollar while creating fears of further inflationary pressure in the country.
The Pak rupee depreciated by 0.48 percent in the interbank market during the trading session on Wednesday, down from Tuesday’s closing of Rs185.23 against the greenback.
According to the country’s central bank, the dollar has gained in value by 5.3 percent, or Rs9.38, since January.
The Exchange Companies Association of Pakistan said the rupee was trading at Rs186.45 for buying and Rs187.70 for selling in the open market. Similarly, Saudi Riyal was trading at Rs49.31 and Rs49.80 while Arab Emirate Dirham was at Rs50.20 and Rs50.70 for buying and selling, respectively, on Wednesday.
“Major factors contributing to the depreciation of Pak rupee are declining forex numbers and the current political situation of the country,” Samiullah Tariq, director research at the Pakistan-Kuwait Investment Company, told Arab News.
“The rising dollar-rupee disparity continues to trigger the risk of elevated inflation in the country due to higher prices of energy and other imported commodities,” he maintained, adding: “This may impact consumer spending especially during the Eid festival.”
Pakistan witnessed a constitutional crisis on Sunday when the deputy speaker of the national assembly disallowed a no-confidence motion against Prime Minister Imran Khan on suspicion that it was part of a foreign conspiracy against the government.
Subsequently, President Arif Alvi dissolved the assembly on the advice of the prime minister who, according to the opposition, had lost his parliamentary majority.
All eyes are now set on the Supreme Court of Pakistan that took notice of the recent political developments to judge their constitutionality.
“We are waiting for an early Supreme Court decision since the delay is causing uncertainty in the country and the economy is suffering,” Malik Bostan, president of the exchange companies’ association, told Arab News.
“The current situation is not only impacting our domestic economy but it is also likely to affect our exports to the United States and Europe,” Bostan said, adding: “It is important to exercise caution while dealing with our trade partners like the US and Europe where 70 percent of our exports are consumed.”
Pakistan’s official foreign currency reserves have also declined by $2.91 billion to $12 billion due to the repayment of external debt, including a major syndicated loan facility from China, according to the country’s central bank.
Last month, the United Arab Emirates had rolled over $2 billion of debt while the country is expecting another $2.3 billion after Beijing agreed to roll over its syndicated facility.
“The UAE had already rolled over our debt last month while the paper work is being processed for the repayment of rolled over amount from China which is expected shortly,” Muzammil Aslam, finance ministry spokesperson, told Arab News on Tuesday.
The stock market of the country, however, remained bullish on Wednesday due to the news of the UAE rollover and speculations related to the Supreme Court hearing.
“Stocks closed higher after reports of debt rollover by the UAE and speculations over positive outcomes of the apex court hearing of the ongoing political crisis,” Ahsan Mehanti, chief executive officer of the Arif Habib Corporation, said.
“Mid-session pressure remained due to falling rupee and economic uncertainty,” he continued. “But reports of a surge in exports of services by 18 percent between July and February played a catalyst role in a bullish close.”