KARACHI: The Pakistani currency hit a new all-time low as the dollar reached Rs188.66 on Tuesday, with traders and analysts attributing it to rising demand for greenback for import payments, falling foreign exchange reserves, and the lack of progress on $6 billion International Monetary Fund (IMF) program.
Pakistan's national currency previously hit a record low on April 07, when dollar was trading at Rs188.18 as political uncertainty gripped the country ahead of the ouster of former prime minister Imran Khan. However, the rupee appreciated and the greenback slid down to Rs181.50 by April 16 after the regime change.
On Tuesday, the rupee further extended losses and devalued by 0.60 percent, with the US dollar closing at Rs188.66. The Pakistani currency has lost its value by 4 percent against the US dollar since April 16, according to the central bank data.
The greenback was trading at Rs189 for buying and Rs190 for selling in the open market, according to the Exchange Companies Association of Pakistan (ECAP).
“Lack of clarity on IMF front and increasing demand for dollar for import payments amid dwindling forex reserves continue to exert pressure on Pakistani rupee,” Samiullah Tariq, research director at the Pakistan-Kuwait Investment Company, told Arab News.
“You will have to take all the steps as agreed with the IMF to get back into the program otherwise the pressure on the currency would continue, which would have impacts on inflation.”
Pakistan’s foreign exchange reserves have declined by $59 million to $10.499 billion due to external debt payments during the week ending on April 30, according to the central bank.
The South Asian country is currently undergoing its seventh review under the IMF’s Extended Fund Facility, which has disbursed $3 billion out of the stipulated $6 billion. However, discussions have been stalled since early March, with the IMF expressing concerns over the previous government’s $1.7 billion relief in energy prices. Ex-PM Khan had announced the subsidies to offset the impact of high inflation.
After the change of administration in Pakistan last month, the new finance minister, Miftah Ismail, held meetings with IMF officials in Washington and requested the global lender to extend the size of its program to $8 billion and the duration till June next year.
However, the new government’s reluctance to roll back subsidies on fuel and electricity prices is clouding the future of the IMF program and negatively impacting the investor sentiment.
An IMF delegation is due to visit Pakistan this month to negotiate reforms and the subsidies. If Islamabad clears the review, Pakistan will get an estimated $1 billion, which would unlock additional external funding from multilateral donors, and help stabilize the market and the economy.
Pakistani stock market on Tuesday witnessed mixed sentiments after yesterday’s selling spree. The benchmark KSE100 index gained 111 points to close at 43,504 level.