KARACHI: The Pakistani rupee on Tuesday extended its losses against the US dollar to close at Rs163.89 in the interbank market due to the rising greenback demand for import payments, currency traders and analysts said.
The rupee lost 22 paisa — or 0.13 percent of its value — against the US dollar and closed at the lowest level since October 7, 2020.
According to currency traders, it has depreciated by 7.08 percent since its recent high of Rs151.1 in May.
The currency plummeted to 10-month low against the greenback, hitting Rs164.25 in the open market, during the day.
“The rupee, which was trading at about Rs152 in May, has depreciated by almost Rs12 against the dollar as demand for external payment to be made by importers has gone up,” Malik Bostan, chairman of the Exchange Companies Association of Pakistan, told Arab News.
“The government is silent on the depreciation of the national currency, though the situation is quite worrisome for investors and importers,” he continued. “The authorities must intervene to support the rupee.”
Analysts say the national currency is losing its value against the greenback due to the current account position since the rupee has been under pressure amid increasing trade deficit.
“The rupee depreciation has been going on during the last two months due to the current account deficit, causing some liquidity pressure since the end of the Eid season,” Samiullah Tariq, director research at the Pakistan-Kuwait Investment, told Arab News.
Pakistan on Monday reported 81 percent growth in the trade deficit for July 2021, the first month of the current fiscal year (FY22), on a year-on-year (YoY) basis. The trade deficit surged to $3.06 billion in July 2021 as imports increased by $5.41 billion, according to the commerce ministry.
“Higher trade deficit is exerting pressure on our currency,” Khurram Schehzad, CEO of Alpha Beta Core, a financial advisory services platform, commented. “Much will depend upon the remittance numbers to squeeze the current account deficit.”
Pakistan posted $31 billion trade deficit during the last fiscal year (FY21) as the imports of goods stood at $56.4 billion.
During that period, the import of petroleum products increased by nine percent to $11.35 billion while food group imports went up by 54 percent to $8.3 billion with 100 percent growth in wheat imports.
According to official data compiled by the Pakistan Bureau of Statistics, the country also witnessed 128 percent increase in the import of dried fruits and nuts along with 3,266 percent growth in sugar imports.
Analysts anticipate the national currency to gain some strength after the expected International Monetary Fund (IMF) inflows.
“The rupee has already absorbed the impact of currency pressure and no major fluctuation or depreciation is expected at least until the end of the current year,” Tariq said, adding: “The expected inflows from the IMF will also support the Pak rupee.”
The IMF board of governors on Monday approved a general allocation of Special Drawing Rights (SDRs) equivalent to $650 billion (SDR 456 billion) to support global liquidity.
The general allocation of SDRs will become effective on August 23, 2021.
The newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund.
Pakistan expects to receive about $2.8 billion from the IMF in the ongoing month due to the fund’s planned new global SDR allocation, though it is subject to the approval of IMF governors.
Pakistan’s central bank in its monetary policy statement last week also indicated the IMF inflows, hoping they would increase the country’s reserve buffers and allow it to meet its external financing needs of about $20 billion.
