Rupee Suffers Another Huge Blow Against US Dollar as Oil Bill and IMF Stir Panic

The Pakistani Rupee (PKR) crashed to another all-time low against the US Dollar (USD) and posted losses in the interbank market today.

It depreciated by 0.85 percent against the USD and closed at Rs. 194.18 after losing Rs. 1.65 in the interbank market today. The local unit hit an intra-day high of Rs. 192.15 against the USD during today’s open market session. The greenback has gained Rs. 7.5 against the rupee since last week, and Rs. 11.25 since the arrival of the new government on 11 April 2022.

On a fiscal year-to-date basis, the rupee has lost 18.87 percent against the dollar, and 21.58 percent since hitting its last calendar year high on 14 May 2021.

The rupee closed in red against the dollar for the fifth consecutive day on Monday amid rising concerns over the country’s mortifying oil import bill. The drop was also assisted by the market’s response to the government’s decision to maintain fuel subsidies “for now”, defaulting on an overriding pre-condition set by the International Monetary Fund (IMF) for the resumption of its loan program. Pakistan is expected to meet with the IMF mission in Doha on Wednesday for the next round of discussions to restart the loan program.

The rupee’s depreciation is mostly due to an uncontrolled increase in imports paired with a significantly slower rate of progress in exports. The trade surplus, which reached $39 billion from July to April, reflects this.

Meanwhile, the central bank’s foreign exchange reserves have fallen to $10.3 billion, the lowest level since June 2020. The import cover, which measures a country’s capacity to pay for imported goods in international currency, is at just 1.54 months.

According to the Forex Association of Pakistan (FAP), the dollar had soared to record highs against the rupee for five consecutive days in the previous week, reaching a high of Rs. 188.66 in the interbank market on Tuesday, then leaping to Rs. 190.90 on Wednesday, passing Rs.192 on Thursday, and hitting Rs. 193.10 on Friday. To recall, the dollar was valued at Rs. 182.3 when the PML-N-led government took power on April 11. The rupee has lost Rs. 11.4 or 6.2 percent of its value since then.

The PKR also reported losses against all the other major currencies in the interbank market today. It lost 79 paisas against the Canadian Dollar (CAD), 90 paisas against the Australian Dollar (AUD), Rs. 2.13 against the Pound Sterling (GBP), and Rs. 2.01 against the Euro (EUR).

Moreover, it lost 45 paisas against the UAE Dirham (AED) and 43 paisas against the Saudi Riyal (SAR) in today’s interbank currency market.