The rupee reached an all-time low versus the US dollar when it increased by 1.8 percent on Wednesday in the interbank market, ostensibly as a result of a worsening political situation.
The State Bank announced that the price of the dollar in the interbank market increased from Rs284.87 the day before to Rs290.22, a rise of Rs5.37 or 1.8%.
The previous highest rate in the banking sector was around Rs288, earlier this year.
However, a large number of stakeholders rejected the reason for the abrupt increase in dollar pricing in the banking sector and accused the banks of illegally profiting from the escalating political situation.
The State Bank previously indicated that it would penalise the banks after they were charged with intentionally inflating the dollar rates to increase profits.
PTI Chairman Imran Khan’s Arrest Case
After taking PTI Chairman Imran Khan into custody on Tuesday, authorities faced nationwide protests that heightened political uncertainty.
Even while the arrest had no immediate effect on imports or exports, the interbank market moved to take benefit of the circumstance.
Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, stated that banks took advantage of the situation to increase their profits, and there was no change in imports or exports after the arrest of Imran Khan led to an increase in the dollar rate.
However, some bankers attributed the increase in the dollar rate to other reasons, such as poor foreign exchange reserves and the delay in releasing the IMF’s $1.1 billion tranche, which further worsened the situation for Pakistan.
Senior bankers noted that Pakistan’s default chances had increased in the next fiscal year, requiring over $30 billion for debt servicing. The State Bank’s foreign exchange reserves of $4.5 billion were barely sufficient to cover one month’s imports, and exports were declining.
Additionally, foreign direct investment had dropped during the first nine months of the current fiscal year.
The open market recorded the dollar rate at Rs297, approximately Rs8 higher than the previous day.
Analysts and researchers predicted that the exchange rate would further deteriorate in the coming weeks due to the worsening political situation.
This would provide valid reasons for donors like the IMF to stay away until the situation calms down, resulting in Pakistan not receiving assistance from the IMF and other friendly countries, which had saved it from default during the current fiscal year.
