The US dollar rose against the rupee for the sixth straight session on Tuesday, breaking above the Rs196 barrier in interbank trade, an all-time high, owing to the country’s depleted foreign exchange reserves and heavy imports.
The greenback rose to Rs196.50 about 1:00pm, up Rs1.90 from the previous day’s close of Rs194.60, according to the Forex Association of Pakistan (FAP).
The dollar’s relentless advance against the rupee began last week on Tuesday, when the international currency touched a new high of Rs188.66. The price subsequently jumped to Rs190.90 on Wednesday, passed Rs192 on Thursday, hit Rs193.10 on Friday, and surpassed Rs194 yesterday (Monday).
The greenback finished at Rs194.60 on Monday, according to FAP statistics, whereas the State Bank of Pakistan recorded the closing rate at Rs194.18. The international currency was traded at higher prices before ending at Rs194.18, according to a Dawn report using the SBP’s closing rate.
According to the Dawn article, the dollar held the rupee in a firm grip for the entire fiscal year FY22, but the last two months were the worst.
Furthermore, according to a report published on Monday by Dawn.com, the dollar was priced at Rs182.3 when the PML-N-led coalition government seized power on April 11, and the currency has lost Rs11.4 or 6.2 percent of its value since then.
According to them, the bullish trend in the currency market is due to increased demand for dollars. The incumbent government’s political stalling on the removal of gasoline and energy subsidies, which is a need for the International Monetary Fund (IMF) to resume its loan programme, has further damaged stakeholders’ trust.
Meanwhile, the rupee’s depreciation is fueled by an out-of-control surge in imports combined with a slower rate of growth in exports.
Oil import bills have already risen due to increased oil prices, but overall imports are also at an all-time high. Imports soared by 72 percent in April, leaving the government with no room to repair its external balance.
Furthermore, the central bank’s foreign exchange reserves have dropped to $10.3 billion, the lowest level since June 2020.
Currency dealers said the unexpectedly high import bill and low foreign investment were not in favour of the exchange rate, while the government already faced a $13 billion current account deficit.
Another factor contributing to the rupee’s depreciation, according to the Exchange Companies Association of Pakistan, is the uncertainty surrounding the release of a $1 billion tranche.
He described the IMF’s payment as a “benchmark,” claiming that if the Fund approved the payment, other international organisations would gain confidence and follow suit.
On Monday, dealers in the interbank informed Dawn that the currency rate had no prospect of improving.
“Until and unless the government takes some tangible actions to stem this runaway collapse, the dollar will appreciate every day,” said currency dealer Atif Ahmed.
To keep the rupee from crossing the Rs200 mark,’strict measures’ are required.
Prime Minister Shehbaz Sharif has urged policymakers to design a comprehensive strategy in cooperation with stakeholders to prevent the rupee’s wild slide and improve reserves in the face of shrinking foreign exchange reserves and significant devaluation of the local currency.
On Monday, he conducted a Zoom conference with Malik Bostan, the chairperson of the Exchange Companies Association of Pakistan (ECAP), and voiced his concern about the current situation.
“The repercussions of yesterday’s meeting will soon be apparent on the market,” Bostan told Dawn.com today.
He also stated that “the government will have to take strict measures” to halt the dollar’s flight and prevent it from hitting the Rs200 threshold. In this regard, he proposed imposing import restrictions on bounding exporters in order to increase revenue from exports.
“We will rapidly push the dollar’s value down in the open market,” Bostan stated if the government can control the dollar’s rate in the interbank market.
Finance Minister Miftah Ismail had reviewed the currency rate problem with an ECAP delegation before to PM Shehbaz’s meeting with Bostan.
During the discussion, it was suggested that all marketplaces around the country be shut down before nightfall, saving a significant amount of energy, lowering the import oil bill, and restoring supply to the general public.
Furthermore, exchange company leaders urged for a ban on all imports except essential commodities.
“If someone believes that additional things should be imported, he could arrange the money himself,” Zafar Paracha, the ECAP’s general secretary, had advised.
In an interview with Dawn.com today, he restated his call for a “economic emergency” and urged political parties to get together to craft a strategy for economic stabilisation.
He also urged the government to stop wasting money on “perks and pleasures” for legislators, warning that if these actions were not done, Pakistan’s condition would resemble that of Sri Lanka, which is presently experiencing a serious economic crisis.