The US dollar climbed above Rs193 in the interbank market on Friday morning, reaching a new all-time high and breaking its previous day’s record which breached the Rs192 mark.
According to the Forex Association of Pakistan (FAP), the day’s start saw the greenback appreciating by Rs1.10 from the previous day’s close of Rs192 and reaching Rs193.10 around 11am in the interbank trade.
Today is the fourth consecutive day that the dollar has risen to a record high against the rupee, with the international currency hitting a high of Rs188.66 in the interbank market on Tuesday, then soaring to Rs190.90 on Wednesday and rising past Rs192 on Thursday.
Alpha Beta Core Chief Executive Officer Khurram Schehzad told Dawn.com it was expected that the value of dollar would rise further today, linking the development to the expected strengthening of the greenback in the international market and an increase in interest rates in the US.
“Moreover, our macros are weak and the IMF (International Monetary Fund) is also not on board,” he added, referring to the uncertainty surrounding a deal with the international moneylender and a delay in the release of a $1 billion tranche by it.
In light of these reasons, Schehzad explained, the currency market was down and the rupee continuing to lose ground against the dollar was expected.
This freefall of the rupee against the dollar has also been attributed to the country’s high import bill.
A Dawn report on Wednesday said the rising exchange rate had rattled the economy.
The rupee had been losing its value mainly because of an uncontrolled rise in imports and a relatively slower pace of growth in exports. This was reflected in the trade deficit, which reached $39 billion in July-April.
Meanwhile, Mettis Global — a web-based financial data and analytics portal — has attributed the dollar’s upward trajectory to the ongoing economic crisis in the country, particularly melting foreign exchange reserves and political uncertainty.
Foreign exchange reserves of the State Bank of Pakistan declined by $190 million to $10.308 billion during the week ended on May 6, the central bank said on Thursday. The overall reserves of the country also dipped to $16.375bn while the holdings of the commercial banks were $6.067bn during the week.
The day-to-day devaluation of the local currency could cause a serious panic-like situation as investors are found clueless. The rising inflation and the devaluation of the local currency mean declining purchasing power of consumers as traders ask for higher profits to save their investments.
Exchange Companies Association of Pakistan General Secretary Zafar Paracha has painted a bleak outlook in case the value of the dollar continues to increase and called for imposing an “economic emergency”.
He said the dollar had been reaching a new high every day, noting that it was being traded at approximately Rs193 in the interbank market today, for nearly Rs195 in the open market and around Rs200 in the grey market.
“We call [on authorities] every day on the media to manage this country but we don’t see any government,” he said and warned that a persistent increase in the value of the dollar would lead to a “storm of inflation” of “unimaginable” intensity.
Giving the example of Sri Lanka, the island nation that has been facing a severe economic crisis, he said it was “very small a trailer” and the situation in Pakistan could be worse. “There (Sri Lanka) the population is only 25 million and here, we have a population of 250m, with people having weapons in abundance.”
“Couple this with the fact that we also gave tribal areas … when people will start looting and plundering there [due to inflation], there will be bloodshed,” he warned.
Moreover, he said Pakistan also did not have good relations with most of its neighbours and a further rise in inflation could lead to a “security situation”.
Paracha urged the judiciary and relevant quarters to bring together political parties to make decisions in the interest of the country and nation.
Pointing out that the country’s foreign exchange reserves had declined significantly, he said, “We only have funds to make imports for one to two months.” In this scenario, if a hostile country takes any action, Pakistan was unlikely to cope, he added.
Paracha also called on the government to restrict unnecessary expenditure, including the use of non-development funds and perks, and placing a cap on the import of non-essential items.
Malik Bostan, chairman of the FAP, also suggested restricting the import of non-essential goods to prevent the dollar from rising further.
Speaking to Dawn.com, he further recommended limiting the use of petroleum products to keep foreign exchange reserves stable. “The unnecessary use of diesel for running big vehicles should be stopped a further increase in our oil consumption, which has risen by more than 30 per cent, can be prevented.”
He also suggested that political parties may together devise a “charter of economy” to stabilise the rupee.
Meanwhile, PTI chief Imran Khan said the current economic situation, including the devaluation of rupee, “reflects lowest ever confidence in imported government”.
“Market awaiting policy and action, which [the] imported government has failed to provide. Both myself and Shaukat Tarin had warned the ‘Neutrals’ that if conspiracy succeeded, our fragile economic recovery would go into a tailspin. That is what has now happened.”