Islamabad [Pakistan]: The Pakistani currency depreciated by 14.5 per cent against the US dollar, registering its worst month in over 50 years as the country continues to struggle with high import payments, depleting foreign exchange reserves, and political uncertainty.
The value of the Pakistani rupee was 204.85 against the US dollar in the inter-bank market at the start of July.
Even though fewer trading sessions took place due to the Eid holidays, the currency closed at 239.37 against the US dollar on July 29, Business Recorder reported.
Earlier, the Pakistani currency slumped by 57 per cent in May 1972. The government had termed the decision inevitable and its value reduced from PKR 4.77 to PKR 11 per US dollar.
Several factors including escalating domestic political tension, low foreign exchange reserves, and speculative behaviour on part of stakeholders have contributed to the freefall of the currency, local media reported.
The currency depreciated in 10 out of 17 sessions. The depreciation took place after the International Monetary Fund (IMF) announced its staff-level agreement with Pakistan authorities on July 14.
Success with the IMF could lead to a depreciation break, IGI Securities Head of Research Saad Khan said.
“If everything goes as per the plan, pertaining to the IMF, it could push the rupee down to 225-230. However, in the long-term, the rupee would remain lower,” Khan said.
Despite the agreement, the ongoing political and economic turmoil in the country has raised concerns among investors, it reported.
This downfall of Pakistani rupees comes as Moody’s Investors Service and Fitch Ratings said they expect Pakistan to secure the USD 1.2 billion bailout from the IMF.
Once the deal amount will be secured, it is expected that pressure on the country’s currency and forex reserves will ease.
“We assume IMF board approval of Pakistan’s new staff-level agreement with the lender,” Krisjanis Krustins, a Hong Kong-based director at Fitch, was quoted as saying by Bloomberg on Wednesday. “This will unlock significant additional financing from the IMF and other multilateral and bilateral sources and may well provide a significant confidence boost to the markets.” (ANI)
