From Zeeshan Mirza
KARACHI: With the uncertainty over the revival of the International Monetary Fund (IMF) loan programme amid increasing political pressure on the government to announce snap polls, the Pakistani rupee slumped to a new historic low in the interbank market.
With a fresh decline of Rs1.61, or 0.81%, the local currency closed at Rs200 against the greenback on Thursday, the State Bank of Pakistan (SBP) reported.
The rupee had closed at Rs198.39 yesterday; however, in line with the analysts predictions, the currency surpassed the startling milestone of 200 within the first few hours of trading Thursday.
On the first day of talks with IMF mission, Pakistan has indicated that it is willing to take “tough measures” such as increases in POL products and electricity prices, but only in stages, in order to restart the stalled $6 billion fund programme.
The domestic currency has maintained the trend of making and breaking records for the eighth consecutive working day as it cumulatively lost 7.7% or Rs14.31 in the last ten sessions.
The currency hit a record low of Rs188.66 on May 10. It then plunged to Rs190.02 on May 11, fell over Rs191 on May 12, reached Rs192.52 on May 13, sank below Rs194 on May 16, down to Rs195.74 on May 17 and closed at Rs198.39 yesterday (May 18).
It is worth mentioning that the country follows a market-based exchange rate where the currency moves are determined by the market forces of demand and supply.
Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 26.95% (or Rs42.46) compared to the previous fiscal year’s close at Rs157.54.
The rupee has maintained a downward trend for the last 13 months. It has lost 31.34% (or Rs47.73) to date, compared to the record high of Rs152.27 recorded in May 2021.
The US currency stayed above the important milestone surpassed a day earlier and closed at Rs201.5 in the open market Thursday.
Revival of the IMF programme has become a necessity for Pakistan in order to curb dollar flight, former finance minister Dr Hafiz Pasha told Geo.tv.
“In the next few days, rupee-dollar parity depends on how talks with the Fund mission unfold,” he said, reiterating that if Pakistan’s delegation successfully convinces the IMF to revive the stalled multibillion-dollar programme then the local currency will stabilise.
Regarding the government’s reluctance on taking tough decisions to meet IMF conditions, the former finance minister said that despite the delay, the international body will show “flexibility” following a statement from the US regarding Pakistan’s economy.
“This time the IMF’s attitude towards the Pakistani delegation will be different because of the US. Pakistan now needs to focus on convincing them [IMF mission] that the country will increase revenues even if they decide against removing subsidies on petroleum products,” he maintained.
A day earlier, a US State Department spokesperson promised Pakistan strong US support for its efforts to restore the economy shortly after FM Bilawal Bhutto-Zardari arrived in New York for a series of meetings including a bilateral one with US Secretary of State Antony Blinken.
Pasha, however, emphasised that if Pakistan moves towards fresh polls this will “negatively” impact the local currency. “Call for fresh elections would create uncertainty in the short run,” he said, adding that Pakistan would also have to stall the IMF programme because the caretaker government does not have enough powers to involve in discussion with the Fund.
“It is important for the new government to present a proper federal budget for the fiscal year 2022-23 which is the second important factor that would play role in stabilising rupee-dollar parity,” he concluded.
Meanwhile, Prime Minister Shehbaz Sharif has taken notice of the continuous depreciation of the rupee against the US dollar. The premier will convene an important meeting on the economic situation to discuss issues related to preventing the currency from devaluing.
During the meeting, which would be attended by the officials from the Ministry of Finance, Federal Board of Revenue and Ministry of Commerce, the premier will be apprised of the situation regarding imports and exports of the country.
According to the directives issued by PM Shehbaz, relevant authorities will present an implementation report on the decision regarding the ban on importing non-essential items.
A day earlier, the premier had imposed a ban on the imports of luxury and non-essential items including cosmetics and vehicles.
Moreover, sources placed in the Federal Board of Revenue (FBR) had revealed that a summary has been received to increase regulatory duty on some of the items which include machinery, mobile phones, ceramics, steel products, etc.