Pakistani rupee falls after market maker group removes currency cap

A money changer counts Pakistan's currency at a market in Karachi on January 6, 2023. (Photo courtesy: AFP)
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Updated 25 January 2023
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Pakistani rupee falls after market maker group removes currency cap

  • Rupee was bid at 240.60 to US dollar, offered at 243 in early trade
  • Currency depreciated 11.23 percent against greenback so far in current fiscal year 2022-23

KARACHI: The Pakistani rupee fell by 1.2 percent on Wednesday after foreign exchange companies removed a cap on the currency, saying it was creating “artificial” distortions in the market as the South Asian country struggles to escape a deepening economic crisis.

Pakistan is battling to meet its external financing obligations in the face of rapidly dwindling foreign exchange reserves that are barely enough to cover a month of imports. It is also beset by decades-high inflation which policymakers are trying to curb with massive interest rate hikes.

The rupee was bid at 240.60 to the US dollar and offered at 243 in early trade, the Exchange Companies Association of Pakistan said in a statement, compared with a range of 237.75/240 at the close on Tuesday.

The rupee has depreciated 11.23 percent against the greenback so far in the current fiscal year 2022-23, which ends on June 30.

The exchange association said late on Tuesday it was lifting the cap on the currency in the interest of the country.

“We have decided that we bring the exchange rate at par with what we are supplying to the banks against credit cards,” Secretary General Zafar Paracha said in a statement, adding that level is 255/256 rupees to the dollar.

Before the cap on the rupee was removed, markets eyed three different rates to assess its value — the state bank’s official rate, the one assessed by the foreign exchange companies, and the black market rate.

“Though the bank rate for today is yet not been disclosed, we think the dollar rate in banks may fall by up to 5 percent in a few days,” said Mohammed Sohail, chief executive officer at brokerage Topline Securities.

Participants in the stock market think the removal of the cap may be a step toward liberalising the exchange market which will help the country unlock stalled IMF funding, Sohail said.

The International Monetary Fund is yet to approve its ninth review to release $1.1 billion, which was originally due to be disbursed in November last year but got held up over fiscal consolidation issues.

The IMF has called for fiscal steps to reduce the budget deficit that include subsidy cuts, slashing energy sector debt, levying more taxes to plug the revenue shortfall, and a market-based exchange rate as conditions for releasing the funding.

Pakistan’s Prime Minister Shehbaz Sharif said on Tuesday that his country was willing to discuss all of the IMF’s demands


Imran Khan’s party shutdown draws mixed response; government calls it ‘ineffective’

Updated 14 min 48 sec ago
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Imran Khan’s party shutdown draws mixed response; government calls it ‘ineffective’

  • Ex-PM Khan’s PTI party had called for a ‘shutter-down strike’ to protest Feb. 8, 2024 general election results
  • While businesses reportedly remained closed in Khyber Pakhtunkhwa, they continued as normal elsewhere

ISLAMABAD: A nationwide “shutter-down strike” called by former prime minister Imran Khan’s party drew a mixed response in Pakistan on Sunday, underscoring political polarization in the country two years after a controversial general election.

Khan’s Pakistan Tehreek-e-Insaf (PIT) opposition party had urged the masses to shut businesses across the country to protest alleged rigging on the second anniversary of the Feb. 8, 2024 general election.

Local media reported a majority of businesses remained closed in the Khyber Pakhtunkhwa (KP) province, governed by the PTI, while business continued as normal in other provinces as several trade associations distanced themselves from the strike call.

Arab News visited major markets in Islamabad’s G-6, G-9, I-8 and F-6 sectors, as well as commercial hubs in Rawalpindi, which largely remained operational on Sunday, a public holiday when shops, restaurants and malls typically remain open in Pakistan.

“Pakistan’s constitution says people will elect their representatives. But on 8th February 2024, people were barred from exercising their voting right freely,” Allama Raja Nasir Abbas Jafri, the PTI opposition leader in the Senate, said at a protest march near Islamabad’s iconic Faisal Mosque.

Millions of Pakistanis voted for national and provincial candidates during the Feb. 8, 2024 election, which was marred by a nationwide shutdown of cellphone networks and delayed results, leading to widespread allegations of election manipulation by the PTI and other opposition parties. The caretaker government at the time and the Election Commission of Pakistan (ECP) both rejected the allegations.

Khan’s PTI candidates contested the Feb. 8 elections as independents after the party was barred from the polls. They won the most seats but fell short of the majority needed to form a government, which was made by a smattering of rival political parties led by Prime Minister Shehbaz Sharif. The government insists the polling was conducted transparently and that Khan’s party was not denied a fair chance.

Authorities in the Pakistani capital deployed a heavy police contingent on the main road leading to the Faisal Mosque on Sunday. Despite police presence and the reported arrest of some PTI workers, Jafri led local PTI members and dozens of supporters who chanted slogans against the government at the march.

“We promise we will never forget 8th February,” Jafri said.

The PTI said its strike call was “successful” and shared videos on official social media accounts showing closed shops and markets in various parts of the country.

The government, however, dismissed the protest as “ineffective.”

“The public is fed up with protest politics and has strongly rejected PTI’s call,” Pakistan’s Information Minister Attaullah Tarar said on X.

“It’s Sunday, yet there is still hustle and bustle.”

Ajmal Baloch, All Pakistan Traders Association president, said they neither support such protest calls, nor prevent individuals from closing shops based on personal political affiliation.

“It’s a call from a political party and we do not close businesses on calls of any political party,” Baloch told Arab News.

“We only give calls of strike on issues related to traders.”

Khan was ousted from power in April 2022 after what is widely believed to be a falling out with the country’s powerful generals. The army denies it interferes in politics. Khan has been in prison since August 2023 and faces a slew of legal challenges that ruled him out of the Feb. 8 general elections and which he says are politically motivated to keep him and his party away from power.

In Jan. 2025, an accountability court convicted Khan and his wife in the £190 million Al-Qadir Trust land corruption case, sentencing him to 14 years and her to seven years after finding that the trust was used to acquire land and funds in exchange for alleged favors. The couple denies any wrongdoing.