Rupee's downward spiral continues unabated as it hits Rs179.44

KARACHI: The Pakistani rupee remained under pressure on Wednesday and fell to a historic low as concerns about political uncertainty and possible delays in the next loan tranche from the International Monetary Fund (IMF) raised fears that Pakistan’s economic outlook will face downside risks.

According to the State Bank of Pakistan (SBP), the rupee closed at Rs179.44 against the US dollar in the interbank market.

The local unit had been under pressure due to a large current account deficit caused by hefty imports given strong domestic demand and spike in global oil and other commodity prices in the aftermath of the Russia-Ukraine conflict.

The rupee has maintained a downward trend for the past 10 months. It has lost 17.84% (or Rs27.17) to date, compared to the record high of Rs152.27 recorded in May 2021.

With a fresh decline of 0.13%, the Pakistani rupee has depreciated by 13.9% (or Rs21.9) since the start of the current fiscal year on July 1, 2021, data released by the central bank revealed.

Earlier, speaking to Geo.tv. Arif Habib Limited Head of Research had said: “Volatility in commodity prices tagged with expectations of higher current account deficit is the reason for the decline in Pakistani rupee value.”

“While it seems, the IMF will be prescribing stringent measures to curtail the twin deficits by increasing interest rates and lowering money supply, they may also be prescribing, although less likely, a weaker rupee,” Tresmark said.

“Till date, the central bank has defended the 180 per US dollar figure, and breaching this level may take it to the 185-188 per US dollar. In defence of a stable rupee, it should be argued that the rupee is still undervalued in REER [real effective exchange rate] terms and any further weakness may have a spiralling inflation effect, which might be the key optic the current government wants to address,” it added.