Pakistani rupee nosedives against US dollar amid political crisis

People exchange foreign currency at a shop in Karachi, Pakistan, on April 7, 2022. (AFP)
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Updated 07 April 2022

Pakistani rupee nosedives against US dollar amid political crisis

  • Dealers warn country may witness Sri Lanka-type situation if currency devaluation continues
  • US dollar has appreciated by more than 51 percent against the rupee since August 2018

KARACHI: Pakistan’s national currency on Thursday hit a new historic low of Rs188.18 against the US dollar amid political turbulence, diminishing foreign exchange reserves and a stalled International Monetary Fund (IMF) loan facility.
The Pak rupee went above Rs189 in the morning trade session as the country’s top court resumed the hearing of a case focusing on the dismissal of a no-confidence vote against Prime Minister Imran Khan which led to a constitutional and political crisis in the country. As the day progressed, however, the rupee bounced back a bit and closed at Rs188.18.
The US dollar was trading at Rs189.25 for buying and Rs190.50 for selling in the open market during the day.
According to the Exchange Companies Association of Pakistan (ECAP), the Saudi Riyal traded at Rs50.20 and Rs50.70 while Arab Emirate Dirham hovered around 51.30 and 51.80 for buying and selling, respectively, on Thursday.
“If corrective measures are not taken, the freefall of Pak rupee may lead the country to a situation like Sri Lanka which is witnessing price hikes and shortages of essential goods like petroleum products,” Zafar Paracha, ECAP general secretary, told Arab News.
Pakistan’s national currency has witnessed a massive decline against the US dollar since Prime Minister Imran Khan took oath as the country’s 19th prime minister in August 2018. The central bank’s statistics reveal the dollar appreciated more than 51 percent from Rs124.24 on August 20, 2018, to Rs188.18 on April 7, 2022.
As the Supreme Court started its proceedings on Thursday to determine the constitutionality of the speaker’s ruling to dismiss the no-trust vote against PM Khan, traders said the market was hoping for an early verdict.
“We are waiting for the judgment of the Supreme Court of Pakistan that is likely to set the future course of the currency market,” Paracha said, adding: “The judgment may bring some stability to the currency market in the days to come because at least there will be some form of government [in the country].”
Analysts warned the US dollar could go up to Rs200, increasing inflationary pressure and foreign debt burden, if the political chaos continued any further.
“The rupee devaluation will significantly increase the debt component and imported inflation,” Aadil Jillani, head of the Economic Division at the Trust Securities and Brokerage, told Arab News, adding the situation would also have a negative impact on the cost of doing business in Pakistan.
“In addition to that, it will also downgrade Pakistan’s ratings and massively hit its current account deficit and deplete reserves,” he continued.
Jillani added the political situation in the country was calling into question the state’s ability to continue policy reforms, run simple administrative matters and secure external financing.
Analysts agreed the national currency was also under pressure due to the stalled IMF extended fund facility.
Pakistan and the IMF were negotiating to complete the seventh review of a $6 billion loan program before the political crisis began.
The discussion stalled as the international lending agency expressed concerns over a relief package of about $1.7 billion announced by the government which included freezing of petroleum prices and cuts in electricity tariff in response to rising inflation.
The fund has said it will resume the review process after the new government is formed.
“The Fund looks forward to continue its support to Pakistan and, once a new government is formed, we will engage on policies to promote macroeconomic stability, and enquire about intentions vis-a-vis program engagement,” Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said in a statement on Monday.


Pakistan central bank may raise rates by 125 bps to tame 13-year high inflation

Updated 05 July 2022

Pakistan central bank may raise rates by 125 bps to tame 13-year high inflation

  • The South Asian nation is wrestling with economic turmoil, a fall in reserves and a weakening currency
  • Another hike would increase government debt servicing costs as well as hurt industries, says an economist

ISLAMABAD: Pakistan’s central bank looks set to raise its key policy rate by 125 basis points at its review on Thursday, as it attempts to tackle 13-year high retail inflation, according to the median estimate in a snap poll of 10 economists and market watchers. 

The economists, analysts and senior professors surveyed were widely split on the quantum of increase by the State Bank of Pakistan (SBP), with views ranging from 50 to 200 basis points. 

Two respondents did not see a need for a rate increase. 

The central bank raised the benchmark interest rate by 150 bps in May, taking the total increase to 400 bps so far this year to counter rising inflation. 

The South Asian nation is wrestling with economic turmoil, a fall in reserves and a weakening currency. 

Data on Friday showed consumer prices in June leapt 21.3 percent from a year earlier, largely on account of a 90 percent spike in fuel prices since the end of May after the government scrapped costly fuel subsidies. 

With the current policy rate at 13.75 percent and inflation running well above, real interest rates in the economy have turned sharply negative. 

“The last monetary policy committee statement is proof that the State Bank of Pakistan is way behind the curve on anticipating inflation,” said Yousuf Nazar, an economist who writes for various publications and formerly with Citigroup. 

“Another hike would increase government debt servicing costs as well as hurt industries. 

It is not going to have much of an impact on exchange rate or overall demand,” he added. 

Most believed a hike was inevitable, given persistently high global energy prices, the abrupt ending of fuel subsidies as well as the need to control demand after SBP said in its last policy statement the economy had rebounded much more strongly than anticipated. 

“The overall policy mix is geared toward stabilization and demand management,” CEO of Macro Economic Insights Sakib Sherani said, adding that this will induce a sharp slowdown in the economy, possibly a recession, in the short run. 

But Fahad Rauf, head of research at Ismail Iqbal Securities, said he does not see the need to increase rates further. 

“The economy is already slowing down. The layoffs have started and are expected to increase further. 

Further cost pressures would only enhance the burden on industries and workers,” Rauf said. 

“The fiscal arm is working now, tough measures have been taken. SBP needs to wait for the results before further tightening,” he added. 

With Pakistan expecting a restart of the much-awaited bailout package from the International Monetary Fund after the country agreed on some tough economic policy adjustments to promote stability, the SBP’s decision is being closely watched. 


Dubai-bound Indian airline plane makes ‘emergency landing’ in Karachi

Updated 05 July 2022

Dubai-bound Indian airline plane makes ‘emergency landing’ in Karachi

  • India’s SpiceJet airline says plane diverted to Karachi due to indicator light malfunctioning
  • The B737 aircraft landed at Karachi airport at around 9am where it’s currently being repaired

ISLAMABAD: A Dubai-bound Indian airline plane on Tuesday made an “emergency landing” in the southern Pakistani city of Karachi, the Pakistan Civil Aviation Authority (PCAA) said. 

The B737 aircraft flew from New Delhi for Dubai this morning, according to the PCAA. The pilot requested Pakistani aviation authorities for an “emergency landing” because of a fuel leak. 

“An aircraft of SpiceJet going from Delhi to Dubai sought permission for emergency landing which was granted and the aircraft with 138 passengers on board landed at Karachi airport after 9am today,” PCAA spokesman Saifullah told Arab News. 

“The aircraft was diverted to Karachi airport for landing after fuel leakage.” 

SpiceJet, however, said the plane was diverted due to “indicator light malfunctioning.” 

“No emergency was declared and the aircraft made a normal landing. There was no earlier report of any malfunction with the aircraft,” the airline said in a series of tweets. 

“A replacement aircraft is being sent to Karachi that will take the passengers to Dubai.” 

The PCAA spokesman said all passengers had been moved to the transit longue of the airport, where they were provided food and refreshments. 

“The aircraft is currently being repaired,” Saifullah added. 


England to tour Pakistan for first time in 16 years from September 15

Updated 05 July 2022

England to tour Pakistan for first time in 16 years from September 15

  • England and Wales Cricket Board security team expected in Pakistan later this month to assess arrangements
  • Tour originally scheduled to be played in Rawalpindi last October but England had called off their visit

ISLAMABAD: Lahore and Karachi are likely to host seven T20Is between Pakistan and England from September 15 to October 2, ESPN cricinfo reported on Monday, quoting the Pakistan Cricket Board chairman. 

PCB is yet to announce the fixtures for the series, which will be the first instance of England touring Pakistan in 16 years. 

The England and Wales Cricket Board’s three-member security team is expected to arrive in Pakistan later this month to assess arrangements, the cricket website said. 

The matches were originally scheduled to be played in Rawalpindi last October but England had called off their visit, following New Zealand doing the same at the last minute over security issues. 

Though Pakistan have Multan and Rawalpindi as other venues to consider, PCB chairman Ramiz Raja said the schedule is “very tight and we can’t go elsewhere.” 

The upcoming series is significant as England have not toured Pakistan since 2005 and two of Pakistan’s home series in 2012 and 2016 were forced to be played in the UAE. 

After England decided to withdraw their men’s and women’s teams from tours to Pakistan last year, Raja had hit out at cricket’s “western bloc.” 

The ECB cited bubble fatigue and “increasing concerns about traveling to the region” to pull out of the series. 

Following the series with England, Pakistan will depart for New Zealand on October 4 to participate in a T20I tri-series (also involving Bangladesh) in Christchurch from October 7 to 14.  

England, meanwhile, will return to Pakistan following the 2022 T20 World Cup for a three-Test series in November as part of the World Test Championship. 

England’s new white-ball captain Jos Buttler last week said he did not expect to have his best team available for the series due to fixture congestion. England’s red-ball players are unlikely to be available at the start of the limited-overs series in Pakistan, with England’s third Test against South Africa due to finish on September 12. 


Torrential rains kill seven, including women and children, in southwest Pakistan

Updated 27 min 54 sec ago

Torrential rains kill seven, including women and children, in southwest Pakistan

  • More than 300 mud houses were destroyed in Quetta after Monday’s downpours in southwestern Balochistan
  • Five people, including two young girls, went missing after a flash flood hit the city's Bhosa Mandi area

QUETTA: At least seven people, including women and children, were killed as torrential rains wreaked havoc in the southwestern Pakistani province of Balochistan on Monday, officials said. 

The rains, which came with the onset of monsoon season in southwest Pakistan, destroyed hundreds of mud houses in the provincial capital of Quetta. 

In an alert this week, the Pakistan Meteorological Department (PMD) said strong monsoon currents, which were likely to prevail for 10 days, could trigger flash floods in Balochistan and southern Sindh provinces. 

“Seven people, including three children and two women, were killed after monsoon rains hit Quetta city on July 04, 2022, while more than 300 mud houses collapsed in different neighborhoods of the city,” Naseer Khan Nasir, director-general of the Provincial Disaster Management Authority (PDMA), told Arab News. 

He said more than 13 people were injured in different rain-related incidents, while two young girls among five others had gone missing after a flash flood hit Bhosa Mandi area of the city. 

He said rescue teams were searching for the missing people, while the district administration was distributing relief goods among people affected by the downpours. 

Sevak Kumar, who hails from Thul area of Sindh, lost six of his family members after a wall collapsed on their tent accommodation on Quetta's Link Badini Road. 

“The family members were sitting inside the tent when the mud wall collapsed due to heavy rain,” said Kumar, who along with his family came to work as laborers. "The women and children were killed on the spot." 

The rains affected telecommunication and power supply remained suspended for more than nine hours as 53 out of 90 electricity feeders tripped across the city. 

Hameed Khan Awan, a Quetta Electricity Supply Company (QESCO) official, said supply through major feeders in the city had been restored, but nearly two dozen feeders were still not functional and QESCO staffers were working on them. 

“The rains caused a breakdown in the city as dozens of electricity pylons collapsed in different areas,” Awan said. "Efforts are now under way to restore supply to areas on the outskirts of Quetta." 

The Quetta district administration has established a flood emergency control room to monitor and address any emergency situation in the city and adjacent areas. 

According to the Met Office, Quetta has so far received 22 millimeters of rain. 

Provincial Minister Mir Zia Langove, who oversees the PDMA, said the government was making relief efforts during the monsoon spell. 

“PDMA teams have reached all major affected areas and distributed food and goods among people rendered homeless after Monday’s downpour,” he told reporters in Quetta. 


Pakistan arrests key suspect in Karachi bombing that killed three Chinese nationals

Updated 05 July 2022

Pakistan arrests key suspect in Karachi bombing that killed three Chinese nationals

  • The three Chinese nationals were killed after a woman suicide bomber blew herself up at Karachi University
  • CM Shah also meets a Chinese delegation, briefs on security arrangements for 3,637 Chinese nationals in Sindh

KARACHI: Pakistan police have arrested a key suspect in connection with an April bombing that killed three Chinese nationals at a university campus in the southern port city of Karachi, a senior police official said on Monday. 

The three Chinese nationals were among four people killed on April 26, when a woman suicide bomber blew herself up outside the Confucius Institute at Karachi University. The separatist Balochistan Liberation Army (BLA) claimed responsibility for the attack. 

Militant groups based in Pakistan’s southwestern Balochistan province have frequently targeted Chinese interests in the country, where Beijing has invested heavily in infrastructure projects that are part of a multibillion-dollar joint regional connectivity initiative, the China-Pakistan Economic Corridor (CPEC). 

“In the in-depth investigation of the case, technical and ground sources have been utilized,” Sindh IG Ghulam Nabi Memon was quoted as saying, in a statement shared by the Sindh chief minister’s office. 

“With the efforts of the CTD Intelligence team, an important accused has been arrested. The details of the investigation have been shared with the Chinese concerned authorities.” 

The Sindh government spokesman, Murtaza Wahab, and senior police officials are due to share details of the arrest at a press conference in Karachi today, on Tuesday. 

Also at Monday’s meeting, CM Murad Ali Shah and a Chinese delegation, led by deputy director-general of China’s Counter-Terrorism Department (CTD) Gao Fei, discussed security arrangements for Chinese nationals working in Sindh, according to the statement. 

The chief minister said his government had deployed 3,361 security men, including 1500 police, 517 army personnel, 173 Rangers, 28 Frontier Corps (FC) personnel and 1,143 private security guards, for the security of 3,637 Chinese nationals, who were working on eight CPEC projects in Sindh. 

“The Chinese delegation told the chief minister that they were technically strengthening CTD and the Special Branch of Sindh Police,” the statement read. 

The Karachi University bombing was the first major attack on Chinese nationals in Pakistan since last year, when a suicide bomber blew up a passenger bus, killing 13 people, including nine Chinese working on the Dasu Hydropower project in the northwestern Khyber Pakhtunkhwa province. 

Beijing has pledged over $60 billion for infrastructure projects in Pakistan under the CPEC framework which is central to its initiative to rebuild a new “Silk Road” through land routes and sea lanes to connect with markets in the Middle East, Africa and Europe.