Karachi January 26 2023: Pakistani currency fall 23.13 rupees or 9.07 percent against dollar in interbank to trade at 254.86 at PST 14:10 as pressure on reserves increases due to hefty debt payments.
This is the biggest single day decline in value of Rupee in the history of the country. On 10th October 2018 Pakistan Rupee slipped by PKR 9.53 against dollar. During the current year Rupee depreciates by 11.07 percent from 226.7 as reserves continue to deplete.
In open market dollar jumped 12 rupees to trade at 255.0 against dollar against yesterday closing of 243 at PST 14:10.
“Near-term challenges for the external sector have increased despite the policy-induced contraction in the current account deficit. The lack of fresh financial inflows and ongoing debt repayments have led to a continuous drawdown in official reserves” says Central Bank in its official statement.
Pakistan seeking aid from the International Monetary Fund are facing growing pressure to allow market forces to play a greater role in setting their exchange rates. In Pakistan’s case, a more market-determined currency may help it secure further aid from the multinational lender, whose disbursement of loans to the nation has seen multiple delays.
Pakistan’s money exchange companies removed the limit on the dollar-rupee rate from Wednesday, and said they will let the local currency drop slowly in the open market. Supply of dollars among onshore money-changing businesses has dried up as locals turn to the black market, with the greenback being sold at about 5 percent above advertised rates.
However, the current account deficit narrowed by around 60 percent to $3.7 billion in H1-FY23.
Notwithstanding the reduction in the current account deficit, the external sector remains under stress due to delay in realization of official financial inflows, debt repayments and ongoing political uncertainty. In this regard, the Central Bank views that the completion of the pending 9th review under the IMF’s EFF is critical for reducing uncertainty and unlocking multilateral and bilateral inflows.
The substantial reduction in current account deficit was due to a sharp contraction in imports, reflecting the impact of policy tightening and administrative measures. The contraction in imports was broad-based, with all major groups, except food and petroleum groups, recording declines.
Petroleum imports increased by 17.4 percent (BOP data), resulting in their share (in total imports) rising to 34.1 percent in H1-FY23 from 23.7 percent in H1-FY22. The benefit of an 18.2 percent fall in imports was partially offset by declines in export receipts and remittances.