KARACHI: Pakistan’s national currency on Monday plunged to another all-time low as the US dollar closed at Rs215.20 in the interbank market, currency dealers and analysts said, attributing it to the uncertain political situation after the landslide victory of ex-prime minister Imran Khan’s party in Punjab by-polls.
Khan’s Pakistan Tehreek-e-Insaf (PTI) party won 15 seats out of 20 that were up for grabs in the 371-member Punjab Assembly in the hotly contested by-polls on Sunday. This has brought the overall number of seats held by the PTI and its allies to 188, two seats more than the simple majority of 186 needed to rule the province.
On Monday, the Pakistani currency lost its value by 1.97 percent, or Rs4.25, against the greenback as demand in the interbank market surged due to concerns over the International Monetary Fund (IMF) loan program.
Pakistan last week reached a staff-level agreement with the global lender and is expected to receive $1.17 billion after the approval of the IMF board in the next six weeks.
“The rupee is under pressure after the results of the by polls held yesterday which has brought back the element of uncertainty,” Tahir Abbas, head of research at the Arif Habib Limited securities brokerage firm, told Arab News.
“Most likely the PTI would make the government in Punjab and there could be some changes at the federal level [too]. In the developing situation, the question arises whether Pakistan would be able to secure the IMF tranche or not.”
The local currency previously hit a record low of Rs211.93 against the dollar on June 22 before it recovered to Rs204.56 on July 4, according to the central bank data.
After the substantial devaluation of rupee, Pakistani currency dealers said it was one of the worst day for Pakistan’s economy.
“Today was one of the worst days for the economy of Pakistan following the substantial devaluation of Pakistani rupee and the government’s non-interference,” Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan (ECAP), said.
Paracha was of the view that despite the political uncertainty, the rupee's devaluation seemed part of the IMF agreement.
“The government has not shown any concerns so it means that the further devaluation of the currency is part of the agreement authorities have signed with the IMF,” he said.
"Pakistan’s fundamentals are strong and there is a broad consensus among the analysts that the dollar must not be more than Rs190 in any condition."
Paracha said if the current situation persisted, it would be hard to avert a Sri Lanka-like situation in Pakistan.
Pakistan's equities also started the week on a bearish note in the backdrop of increasing noise on the political front after the shock victory of the PTI in Punjab by-elections.
“Pakistan stocks witnessed massive pressure in scrips across the board on political uncertainty and record slump in rupee after the PML-N lost to the opposition in Punjab province,” Ahsan Mehanti, chief executive officer of the Arif Habib Corporation, told Arab News.
“The unexpected delay in release of IMF tranche to the next two to three weeks and uncertainty over funding from friendly countries to support plunging rupee played a catalyst role in bearish activity at the Pakistan Stock Exchange.”
Analysts say if the country goes for an early election, it would unclear whether the IMF tranche would be released or the global lender would wait for the next government to take charge and then disburse the sum.
On Saturday, Finance Minister Miftah Ismail said Pakistan was expected to receive $4 billion from friendly states in the next few months, while another $6 billion were expected from the Asian Development Bank and the World Bank.
