Karachi July 22 2022: Pakistan rupee continue to drop against the dollar and drop by 2.19 rupee to trade at 229 in the interbank on the eve of Chief Minister elections in country’s largest province where ruling party lost majority few days ago amid depleting foreign exchange reserves.
Foreign exchange reserves held by the State Bank of Pakistan were decreased by USD 389 million on higher debt repayments, revealed on Thursday by State Bank of Pakistan.
With a clear majority in the Punjab Assembly after inflicting a crushing defeat on the ruling PML-N, the PTI-PML-Q alliance should apparently have no problem getting its candidate, Chaudhry Parvez Elahi, elected to the CM’s office.
Former Pakistan Prime Minister Imran Khan has again called for an early national election after his party seized control of the state assembly in Punjab, the country’s most populous province that raises concerns over IMF program.
The Pakistan Tehreek-i-Insaf on Sunday routed the PML-N by winning at least 15 seats in the crucial by-elections on 20 seats that got vacated after the disqualification of PTI members who had voted for Hamza Shehbaz for Punjab chief minister’s office.
Federal Minister for Finance and Revenue, Miftah Ismail said on Wednesday that government had taken result-oriented measures to level imports with exports and remittances.
“We are trying to bring imports almost equal to exports and remittances.” says finance minister.
Because we do not have space in foreign exchange reserves to reduce these and we also do not have other reserves. So we want to strike balance between imports exports and remittances,” the federal minister said while addressing a press conference.
Since by elections of largest province, rupee falls 18.04 rupees or 8.6 percent. Fitch revision in Pakistan outlook to negative from stable amid increase in political tension despite Pakistan reaches staff level agreement with IMF for release of $1.17 billion under 7th and 8th review of Extended Fund Facility further worsen the situation.
Ratings agency Fitch on Tuesday revised its outlook on Pakistan to negative from stable, citing deterioration in country’s external liquidity position and financing conditions since early 2022.
Fitch affirmed Pakistan’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘B-‘.
However, SBP says the recent movement in the Rupee is a feature of a market-determined exchange rate system says State Bank of Pakistan.
Under this system, the current account position, relevant news items, and domestic uncertainty together determine daily currency fluctuations.
Recent Rupee depreciation against the US$ is also in large part a global phenomenon. Globally, the US$ has surged by 12% in the last 6 months to a 20-year high, as the Fed has aggressively raised interest rates in response to rising inflation.
Like most advanced and emerging market currencies across the world, the Rupee has depreciated against the US$ since Dec 21. It has depreciated by 20% over this period.