The US dollar continued to set new records on Tuesday as it rose to Rs212 against the local currency during morning interbank trading.
According to the Forex Association of Pakistan (FAP), the rupee depreciated by more than 2 rupees to hit a record low of 212 rupees against the dollar from Monday’s close of 209.96 rupees. yesterday the dollar appreciated by a strong Rs1.21, a trend that persists for more than a week.
According to MettisGlobal – a web-based financial data and analysis portal – the rupee incurred a colossal loss of Rs6.4 for five consecutive sessions last week.
Komal Mansoor, head of research at Tresmark, said dawn.com that it seemed that the country was now completely dependent on an IMF bailout.
“There is some support for the rupee around the current level of 211, but we see a gradual depreciation of the rupee on a daily basis until such time as the IMF staff-level agreement is signed,” he said.
Meanwhile, the IMF credit line has stalled since early April as negotiations with the international money lender remain inconclusive. the next fiscal year.
Pakistan had signed a 39-month $6 billion Extended Fund Facility with the IMF in July 2019, but the Fund halted disbursement of around $3 billion when the previous government reneged on its commitments and announced fuel subsidies and Energy.
Yesterday, Finance Minister Miftah Ismail voiced They expect an agreement to be reached with the IMF for the reactivation of the Extended Fund Service (EFF) “within one or two days.”
Given his optimism, a Sunrise reportCiting diplomatic sources, he said the United States had agreed to help Pakistan negotiate a deal with the IMF.
Earlier, media reports had claimed that Islamabad was “seeking Washington’s support” to renew its Extended Fund Facility (EFF) with the IMF. As the largest shareholder, the United States has considerable influence over IMF decision-making.
The depletion of foreign exchange reserves ‘presses’
FAP President Malik Bostan blamed the rapid depletion of foreign exchange reserves for “pressuring” the rupee.
“After a long time, foreign exchange reserves have fallen to single digits, which has worried the market,” he said.
According to SBP, Pakistan’s reserves have fallen another $234 million to close at just under $15 billion in total. The central bank’s share of these reserves is just under $9 billion.
Second, Bostan added, the demand for the dollar is high due to the upcoming Haj season. “More than 400,000 Pakistanis are going to do Haj this year and they are buying dollars. This is negatively affecting the local currency.”
Rumors of stopping LC
Previously, a Sunrise report said that the foreign exchange market was affected by uncertainty and rumors that banks have stopped opening letters of credit (LC)
However, such a situation was denied by the central bank. “State Bank has not prevented banks from making import payments. Even today, import payments of approximately $200 million have been executed,” said SBP chief spokesman Abid Qamar.
For its part, the SBP has required prior approval before opening LCs or registering contracts for certain types of imports such as automobiles (CKD), cell phones, and certain types of machinery. But these instructions were issued on May 20 and not today, he said.
On May 20, the SBP issued a circular following the federal government’s decision to prohibit imports of luxury and non-essential goods. The decision meant consuming fewer dollars and saving the economy from imported inflation. So far, the country’s import bill has already exceeded 70 billion dollars in the outgoing year.
more to follow