On Tuesday, the rupee witnessed a further huge drop to the US dollar, falling 1.03 percent in the inter-bank market.
According to reports from the State Bank of Pakistan (SBP), the rupee ended at 184.44 following depreciation day-to-day of Rs1.90 (or 1.03 percent. The currency had started the week with a 0.54 percent decline on Monday.
After experiencing a brief period of appreciation in the last week, the currency of Pakistan has reverted to its depreciating ways, which saw it reach record lows earlier this month. According to analysts, an increasing current account deficit, a high cost for imports, and a decline in foreign currency reserves have slowed sentiment in the market.
Back to depreciation: Rupee falls 0.54% against the US dollar
Oil prices, a significant indicator of currency parity, oscillated on Tuesday as investors feared the lack of supplies in the world following Libya stopped some exports. Factories in Shanghai are preparing to resume operations following the COVID-19 shutdown. This should ease the pressure on demand.
“The inability of the new government to take fiscal and monetary tightening measures is not boding well for the economy,” Saad Khan, Head of Research and Research of IGI Securities, told Business Recorder.
Khan stated that the government was “shying away from taking non-popular decisions” in the same way that it has kept the oil price unchanged.
In the meantime, inflation is predicted to increase because of the Ramazan factor since the prices of food are still at a high level. “This is a trend in Ramazan that the price of food items shoot up due to rising demand,” said Khan.
The expert urged the government to implement strict measures to stop the decline in the nation’s foreign currency reserves.
“The government should stop the import of luxury products and issue Euro bonds as soon as possible to boost its diminishing reserves. Additionally the IMF program should be revived in order to improve economic growth,” stated Khan.
PBC calls on the PM to restart the IMF program to end the fuel subsidies
The pressure has been increasing on Pakistan’s foreign side following the country’s trade deficit increased by 70.76 percent, from $20.802 billion in July-March 2020-21 to $35.522 billion in July-March 2024-22.
Khan thinks that the rupee will likely rise above the 185-186 threshold in the coming days.
However, the foreign exchange reserves of the SBP are now below $11 billion. This is the lowest amount since June of this year. The total foreign reserves that are liquid by the nation stood at $17.03 billion on April 8, according to the SBP.
