Dollar rises, yet is Rs14 cheaper than Petrol

Dollar-Rupee exchange rates rose beyond 210 in intra-day trading on Monday, as concerns about the IMF’s rescue programme and dwindling foreign exchange reserves weigh on the rupee’s value.

Analyst Abdullah Umer of Ismail Iqbal Securities told the Business Recorder that “the primary issue is uncertainty relative to the restart of the IMF programme,” which is leading to a depreciation of the local currency.

A devaluation of Rs1.44 versus the greenback was recorded at the inter-bank market on Monday morning. Panic over the IMF’s $6 billion Extended Fund Facility and a drop in the State Bank of Pakistan’s foreign exchange reserves caused the rupee to drop to 208.75 versus the US dollar on Friday.

In a move dubbed “another fuel bomb” by the government, the PMLN raised the price of gasoline by Rs24.03 per litre to Rs233.89 on late Thursday.

One of the IMF’s requirements for reviving the programme was the elimination of fuel subsidies.

There is optimism among experts that the Financial Action Task Force’s recognition of Pakistan’s two acts would have a beneficial effect on the economy.

The rupee has been under pressure because of rumours of a lack of dollars in the inter-bank market, according to the expert.

Remittance flows are projected to slow down in the following days, he added, and this might further harm the country’s foreign currency reserves and weaken the country’s monetary unit.

There has been an uptick in the EFF’s unpredictability this week as reports suggest the lender is dissatisfied with the Pakistan budget, fuelling fears that it could scale the IMF programme back.

As a result, the SBP’s foreign exchange reserves dipped below $9 billion, which exacerbated the local currency’s difficulties.

It was a mistake, according to Vice President of the Pakistan Businesses Forum Ahmad Jawad, to devalue the rupiah under the PTI administration in order to have a “market decided” currency rate.

“Dollarisation of Pakistan’s economy is not sustainable,” he warned, adding the government should immediately rein in dollar flights.

When the local currency loses its stability as a means of exchange owing to hyperinflation or volatility, he pointed out that this is what is happening, “Dollarisation is a condition that is developing in Pakistan.”