Karachi, July 19, 2023 – The Pakistani Rupee (PKR) experienced yet another fall against the US dollar on Wednesday, closing at PKR 283.80 in the interbank foreign exchange market.
IMF Report and Import Demand Drive Fourth Consecutive Day of Loss
The State Bank of Pakistan (SBP) issued the exchange rate, reporting a decline of 76 paisas as compared to the previous day’s closing of PKR 283.04 in the interbank foreign exchange market.
READ MORE: Rupee Witnesses Significant Devaluation Against US Dollar, Plummeting to PKR 283.04
This latest drop marks the fourth straight day of depreciation for the local currency against the dollar, witnessing a total devaluation of PKR 7.34 during this period.
Currency experts attribute the recent decline in the rupee’s value to two main factors. Firstly, it came in response to a report published by the International Monetary Fund (IMF) on Pakistan’s loan program. The report painted a bleak picture of the country’s economy, warning of severe economic challenges in the future despite obtaining foreign funds.
READ MORE: Rupee Drops PKR 1.67 Against Dollar Amid Surging Import Payment Demand
Secondly, the sharp fall in the rupee is also attributed to a surge in demand for import payments. The government’s imposition of conditions on import payments led to a backlog of import consignments. However, after the central bank’s recent approval, customs clearance procedures are now back in full swing, and banks are issuing letters of credit without restrictions.
It’s worth noting that the latest loan agreement with the IMF requires Pakistan to maintain a flexible exchange rate, allowing market forces to determine the rupee’s value. This move aims to ensure a more balanced and market-driven approach to currency valuation.
READ MORE: Pakistani Rupee Weakened Against US Dollar to PKR 277.59 at Interbank Closing
Amidst these developments, the SBP has witnessed substantial foreign inflows over the past week, bolstering the country’s foreign exchange reserves. Government officials are optimistic, claiming that the reserves could reach a promising $14 billion in the upcoming weeks.
The devaluation of the Pakistani Rupee against the US dollar underscores the challenges faced by the nation’s economy. The surge in import payment demand and the subsequent clearance process have contributed to the depreciation. However, as the government adheres to the IMF agreement, it aims to maintain a flexible exchange rate that responds to market dynamics.
READ MORE: Pakistani Rupee Strengthens to PKR 276.46 Against Dollar After IMF Bailout Boost
Market observers and experts will closely monitor the fluctuations in the exchange rate in the coming days. Additionally, the progress of customs clearance and the impact of foreign inflows on the country’s foreign exchange reserves will play a vital role in determining the rupee’s future trajectory.
