KARACHI: Pakistan's rupee continued its free fall against the US dollar on Thursday, with the greenback reaching an all-time high of Rs271.36, a week after Islamabad removed artificial controls from its exchange market to secure an International Monetary Fund (IMF) bailout package.
After Pakistan's currency dealers announced removing the exchange rate cap last week, the rupee declined by a massive Rs25 or 9.6% in a single day. With a staggering $3.6 billion in reserves barely enough to cover import payments for a month, Islamabad has agreed to the IMF's tough conditionalities to revive a stalled $7 billion loan program it hopes would lead to more inflows from multilateral organizations and "friendly countries."
The IMF has been pushing Pakistan to remove artificial controls from its exchange market. Experts have warned the rapid weakening of the rupee would usher in an inflationary storm in the country.
On Thursday, Pakistan's central bank shared data on Twitter according to which the rupee declined by Rs2.53 or 0.93%, with the greenback selling at Rs271.36 in the interbank market.
"The Pakistani rupee witnessed pressure and closed at a record low against the U.S. dollar mainly due to less inflows of export proceeds," Zafar Sultan Paracha, general secretary of the Exchange Companies Association of Pakistan, said.
"The country’s political and economic situation also continued to exert pressure on the rupee," he added.
Earlier this week, international credit ratings agency, Finch Ratings, said Pakistan's rupee would further weaken and exacerbate inflation in the country.
Official data showed on Wednesday that Pakistan’s inflation rate surged to 27.6 percent, the highest in over four decades, on a year-on-year basis in January 2023.
“In the near term, it [weakening rupee] could exacerbate imported inflationary pressure, and may eventually result in steeper policy rate hikes from the SOP,” Finch said.