KARACHI: After a brief respite, the Pakistani rupee lost its value by 1.07 percent against the United States Dollar in the interbank market on Monday, amid stuttering bailout talks with the International Monetary Fund (IMF) and a rising demand for import payments, traders and analysts said.
The rupee recouped some losses in the past week after hitting an all-low of Rs202.01against the USD on May 26, 2022 in the interbank market. The rupee closed at Rs 200.06 against the greenback today, Monday, shedding 1.07 percent or Rs2.14 in the interbank market.
Pakistan and IMF agreed to a three-year $6 billion loan program in 2019. Pakistan, wary of surging inflation, is struggling to implement tough policy commitments including removing subsidies on its oil and power sectors.
Last month, seventh review talks on the loan scheme failed to achieve a breakthrough as the Fund pushed Pakistan to roll back the subsidies. Pakistan has since increased the prices of petroleum twice.
“There are major inflows of dollars in the country amid declining forex reserves and this situation is exerting pressure on the Pak rupee because the demand for dollars for import payments is still high,” Abdul Azeem, head of research at Spectrum Securities, told Arab News. “The recent improvement in the currency market was mainly due to the talks with the IMF and other countries including China. The currency will remain under pressure until the Imports are not restricted.”
Currency dealers said the pressure on the rupee was partly because payments for oil imports were due this week.
“The payment for oil imports were made today which increased the demand for dollars. Besides, it seems that the banks are also speculating, which is reflected by the erratic movement in the currency exchange rates,” Zafar Paracha, general secretary of the Exchange companies Association of Pakistan (ECAP), told Arab News.
“We have not received dollar inflows from IMF and any country and the government has not yet taken any practical steps, including imposition of financial emergency to curtail spending.”
Meanwhile, finance minister Miftah Ismail on Monday said the prime minister would soon announce austerity measures but denied a financial emergency would be declared in the country.
“The Prime Minister will at some point announce austerity measures to save government expenditures. But there is not going to be any declaration of financial emergency. Nor is there any financial emergency. After two increases in petrol prices, we are out of the financial crisis,” Ismail said in a Twitter post.
The finance ministry and central bank also refuted reports about the freezing of foreign currency accounts and Roshan Digital Accounts and other emergency measures.
“The Government of Pakistan and the State Bank of Pakistan assure all account holders maintaining Foreign Currency Accounts (FCA), Roshan Digital Accounts (RDA) and Safety Deposit Lockers in banks in Pakistan that their accounts and lockers are completely safe, and that there is no proposal under consideration to put any restriction on them,” the finance ministry said in a statement on Monday.
“The Government and State Bank are taking all necessary measures to ensure macroeconomic stability in the country. The recent difficult decisions taken by the Government, including the reduction of subsidy on petroleum products, will pave the way to reach an agreement with the IMF and release of the IMF tranche and financial assistance from other multilateral agencies and friendly countries.”
