The Pakistani rupee kept ‘pedal to the metal’ losing over Rs12 value against the US dollar as forex companies removed a cap on the exchange rate to win much-needed loans from the International Monetary Fund (IMF).
The local unit was trading at Rs268.30 compared to Thursday’s close of Rs255.43 in the interbank market, data released by the Exchange Companies of Pakistan showed.
The greenback has gained Rs37.41 in the interbank market since Thursday as forex companies removed a cap on the exchange rate — a key demand of the IMF as part of a bailout programme agreed upon in 2018.
Pakistan is drastically short on forex reserves owing to persistently rising demand for the dollar as the foreign exchange reserves held by the State Bank of Pakistan further nosedived to $3.6 billion as of January 20, 2023, after witnessing a decline in reserves by $923 million owing to external debt repayments.
The rupee fell to 265 to the dollar in the open market, a decline of Rs3 compared to the day before, according to the rates provided by the ECAP.
A day earlier, the rupee shed 24.11 in the interbank market, falling as low as 255.43 rupees to the dollar. The 9.6% decline is the second-biggest drop in a single session.
The previous low of 239.94 rupees was recorded on July 28, 2022, when Pakistan´s long-struggling economy was further weakened by political chaos and devastating floods.
In 2019, the government of former prime minister Imran Khan brokered a multi-billion-dollar loan package from the lender of the last resort.
But the economy slid backwards when Khan reneged on his promise to cut subsidies and market interventions that had cushioned the cost-of-living crisis.
Prime Minister Shehbaz Sharif, who ousted Khan in a no-confidence vote last spring, has also been reluctant to meet loan conditions amid falling popularity.
Exchange Companies Association of Pakistan President Zafar Paracha told AFP the cap was lifted on Wednesday “in consultation with the state bank”.