US dollar continued its surge against the rupee on Thursday, breaching the Rs189 barrier in the interbank trade – a trend that is largely attributed to the stalling of an International Monetary Fund (IMF) loan facility as well as rising imports. According to the Forex Association of Pakistan (FAP), the greenback appreciated by Rs3 over Wednesday’s close of Rs186.13 to reach a new high of Rs189.25 in the interbank market on Thursday. Earlier on Wednesday, the dollar had closed 90 paisa up from Tuesday’s Rs185.23. The dollar was being quoted at Rs189.02 in interbank at 1:18pm. Meanwhile, the currency’s selling price was recorded at Rs188.70 and buying rate at Rs188.20 in the open market at 12:35pm, says a media report. Last week, the dismissal of no-trust motion against Prime Minister Imran Khan by the National Assembly Deputy Speaker Qasim Suri led to the dissolution of the assembly by President Arif Alvi on the premier’s advice. Following these developments, the IMF said on Monday that while there was “no concept of suspensions” within its programmes, it would engage further with Pakistan “once a new government is formed” in the country. According to renowned economist Dr Hafiz Pasha, rupee was under double pressure – economic and political. “Uncertain political situation, rising current account deficit and depleting foreign exchange reserves are the prime reasons behind the free fall of the rupee against the greenback,” he said, mentioning that suspension of the International Monetary Fund (IMF) programme had also raised concerns among investors. The rupee has maintained a downward trend for the past 11 months. It has lost 23.58% (or Rs35.91) to date, compared to the record high of Rs152.27 recorded in May 2021.
With a fresh decline of 1.09%, the rupee has depreciated by 19.44% (or Rs30.64) since the start of the current fiscal year on July 1, 2021, data released by the central bank revealed.
Pasha mentioned that Pakistan’s requirement for next four-five months is around $13 billion; however, due to the ongoing political and economic crisis, it is “difficult” to meet the demand. Exchange Companies Association of Pakistan General Secretary Zafar Paracha identified this “deadlock” in engagements with the IMF as one of the reasons behind the rupee’s continuous decline against the dollar. He further said that rising imports was also increasing pressure on the rupee, leading to a surge in the value of dollar.
According to Bostan, rising imports and the consequent growing trade deficit could keep the rupee under pressure in the future as well. He further said a “persistent rise in the value of dollar is damaging the economy,” adding that the trend had led to an increase of Rs1 trillion in foreign debt.
Meanwhile, Paracha called for intervention from the State Bank of Pakistan (SBP) to control the dollar’s rising rate and action against banks involved in “sattabazi” (manipulation of the dollar’s value).
Traders and industrialists, for their part, say the free float exchange rate idea is not working, and they have also been appealing to the SBP to play its role in bringing stability as the exchange rate volatility is posing a serious threat to the economy. For its part, the central bank remains silent over the current exchange rate situation, while the government has been arguing that it was due to higher demand for dollars from the importers.
