KARACHI: Pakistani Rupee (PKR) fell plunged by PKR 4.61 to the dollar on Wednesday owing to an international rating agency downgraded the country’s outlook.
The exchange rate recorded a decline of RKR 4.61 in rupee value to PKR 266.11 to the dollar from previous day’s closing of PKR 261.50 in the interbank foreign exchange market.
READ MORE: Rupee declines by PKR 1.58 to dollar on import payment demand
Currency experts said that the rupee was under pressure during the day as currency rating of the country was downgraded by the international rating agency.
A day earlier, Moody’s Investors Service downgraded the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa3 from Caa1.
Moody’s has also downgraded the rating for the senior unsecured MTN program to (P) Caa3 from (P) Caa1. Concurrently, Moody’s has also changed the outlook to stable from negative.
READ MORE: Dollar eases by seven paisas to Pakistani rupee in interbank
The decision to downgrade the ratings is driven by Moody’s assessment that Pakistan’s increasingly fragile liquidity and external position significantly raises default risks to a level consistent with a Caa3 rating.
The local currency recorded a historic low of Rs276.58 to the dollar on February 03, 2023.
The rupee is making recovery due to IMF conditions that have been met by the local authorities for obtaining a tranche of $1.2 billion under Extended Fund Facility (EFF).
The country is hoping to finalize the staff level agreement by this week, which will make it possible for the release of the tranche.
READ MORE: Rupee outperforms dollar to reach PKR 259.99 in interbank market
In order to meet IMF conditions, the government announced a phenomenal increase in prices of electricity, gas and petroleum products. Besides, the government also announced a mini budget for generating additional revenue of Rs170 billion.
The country’s foreign exchange reserves depleted sharply during the past one year and presently at an alarming level. However, in the past two weeks the official reserves slightly increased, giving some breathing room to the local currency.
READ MORE: Rupee ends at PKR 260.93 to dollar in interbank forex market
The official foreign exchange reserves of the State Bank of Pakistan (SBP) increased by $65 million to $3.258 billion by the week ended February 17, 2023 as compared with $3.193 billion a week ago.
The current level of the official foreign exchange reserves are only to provide import cover for about two weeks or 19 days.
The import bill for the month of January 2023 has been recorded at $4.856 billion, as per Pakistan Bureau of Statistics (PBS). The benchmark foreign exchange reserves of a central bank should be at a level to provide three months import cover.
The official foreign exchange reserves of SBP fell sharply to an almost nine-year low. Previously, the official reserves of the SBP were seen at this level at $3.19 billion in February 2014.