KARACHI
Pakistani rupee struggled against the US dollar in the interbank trade for the third straight day due to political disturbance in the country and depreciated by 20 paisas (-0.07 percent) on Friday.
The State Bank of Pakistan said in a tweet that the dollar opened at Rs285.62 in the interbank market and closed at Rs285.82. In the open market, the rupee was traded at 291/296 against 290/295 per dollar a session earlier. During the current fiscal year 2022-23, Pakistani rupee has lost Rs79.95 against the US dollar in the interbank, while it plummeted by Rs59.39 against the greenback in the current year.
According to a latest report by Bloomberg, the rupee is likely to rebound to 244 per US dollar after October 2023 if the political turbulence passes as elections would help restore order. However, the currency will likely fall further if Chairman PTI Imran Khan and the government continue to clash and/or if the IMF chooses not to provide loans, the report warned.
“Pakistan’s rupee is undervalued by about 14 percent, according to our model,” Ankur Shukla, South Asia Economist for Bloomberg Economics said on Friday. He attributed the depreciation to the delays in aid from the International Monetary Fund and clashes between the government and opposition leader Imran Khan.
According to the estimations put forth by Bloomberg Economics, the fair value of PKR is around 244. This fair value measures the change in the real effective exchange rate required to bring the current account deficit in line with long-term trends.
Currency analysts attribute this depreciation to the heightened demand for the US dollar in relation to import and other corporate payments. Additionally, concerns surrounding the ongoing International Monetary Fund (IMF) programme added pressure to the local currency. Experts say resumption of the IMF programme, which remains stalled since last year, is crucial for the debt-ridden economy.
Pakistan’s external financing pipeline appeared drying up without the IMF umbrella, as it received $8.1 billion in the first 10 months (July-April) of the current fiscal year 2022-23 against over $13 billion in the same period last year, showing a decrease of 38 percent. This implies a constant precarious position of the foreign exchange reserves despite tight import curbs.
Pakistan’s foreign exchange reserves with its central bank decreased by $72 million to $4.312 billion at the end of last week due to external debt repayment. The total liquid foreign exchange reserves held by the country stood at $9.938 billion as of May 12, 2023, compared to $9.99 billion on May 5, 2023, depicting a decline of $53 million.
