Amid uncertainty surrounding inflows from the International Monetary Fund (IMF), the Pakistani Rupee (PKR) hit a new record low of PKR 287.85 to the dollar on Wednesday.
This represents a decline of 56 paisas from the previous day’s closing of PKR 287.29, which was already the lowest level against the dollar in the interbank foreign exchange market.
READ MORE: Rupee crashes to historic low at PKR 287.29 against dollar
Experts attribute this drop to a delay in the IMF loan program and a decrease in foreign exchange reserves, which have fallen to $9.816 billion as of March 24, 2023, down $323 million from the previous week’s $10.139 billion.
This decline is significant considering that Pakistan’s foreign exchange reserves had reached a record high of $27.228 billion on August 27, 2021, before declining by $17.412 billion.
Despite the decrease, Pakistan’s State Bank’s official reserves still provide nearly one month’s import cover, although it ideally should maintain reserves equivalent to three months’ worth of import payments.
READ MORE: Rupee ends near all-time low against dollar at PKR 285.04
The decrease in the value of the PKR can be attributed to economic challenges, political uncertainties, and depleting foreign exchange reserves. Although the PKR had strengthened against the dollar due to a significant contraction in the current account deficit, a lack of inflows has put pressure on the currency.
Official data showed that exports fell by 8.65% and workers’ remittances dropped by 11% during the first eight months (July-February) of 2022/2023.
READ MORE: PKR slips by 13 paisas to dollar on falling forex reserves
Pakistan has been facing a foreign exchange crisis due to a decrease in foreign exchange reserves, a widening current account deficit, and delays in obtaining loans from international organizations such as the IMF.
The country’s efforts to reduce the current account deficit have been hampered by a decrease in exports and workers’ remittances. In an attempt to address the crisis, Pakistan has been seeking loans and financial assistance from international organizations such as the IMF.
READ MORE: PKR recovers against dollar to end at PKR 283.66
However, delays in obtaining these loans have prolonged the crisis, and the country continues to face challenges in managing its foreign exchange reserves and stabilizing the value of its currency.
