On the interbank market on Thursday, the Pakistani rupee declined by Rs18.74 versus the dollar, reaching a record high of Rs284.85 in morning trade, according to information provided by the Exchange Companies Association of Pakistan (Ecap).
Experts blamed the government’s standoff with the International Monetary Fund for the record loss, which is 7.04 percent (IMF).
According to SBP data, the PKR closed Wednesday at Rs266.11 per USD.
“Uncertainty resulting from IMF funding delay”
According to Mohammed Sohail, chief executive of Topline Securities, the recent decline was mostly brought on by a lack of confidence in the currency market due to the IMF’s delayed funding.
The “crackdowns on currency merely reinforced the grey market”
According to Zafar Paracha, secretary general of the Exchange Companies Association of Pakistan (ECAP), Pakistan was urged by the IMF to exchange dollars at the going rate for commerce with Afghanistan.
In other words, they had stated that rather than the interbank rate or the open market, our true rate should be the grey market rate. They are correct since the only location where trading in dollars now occurs is on the black market, he continued.
He claimed that because of restrictions put in place by the government on foreign exchange, trading moved to the black market.
The numerous limitations they have placed on foreign exchange companies regarding the buying and selling of the dollar, he claimed, prevent the currency from rising or falling.
He claimed that despite government crackdowns [on the grey market], this is still the case. Asserting that carrying out crackdowns would not help, Paracha urged for a revision of the policies.
“Unintentionally, our policies have substantially aided the grey market. The IMF is aware of this as well, and has advised us to get our exchange rate between the rupee and the dollar to that level,” he continued.
dire situation
Due to delays in a deal that Pakistan and the International Monetary Fund have been discussing since early last month, the currency has been declining recently.
One of the things the IMF wants Pakistan to do is switch to a market-based currency exchange rate regime. If the board of the IMF approves this measure, it will release a funding tranche of over $1 billion that has been held up since late last year over a policy framework.
The lender designs the requirements to ensure that Pakistan reduces its fiscal deficit before presenting its annual budget in June.
Pakistan has already taken the majority of the other earlier steps, such as increasing the cost of fuel and energy, ending subsidies in the export and power industries, and raising extra money through new taxes in a supplemental budget.
But, the budgetary changes required by any agreement are likely to increase the already record-high inflation rate, which reached 31.5 percent in February.
The IMF has also asked Pakistan to increase policy rates and fulfil bilateral and multilateral external financing commitments.
China, Pakistan’s longtime ally, is the only nation to have refinanced $700 million to Islamabad.
The expected outcome of the off-cycle meeting on Thursday is that the Pakistani central bank will increase its benchmark policy rate by 200 basis points.
