Rupee breaches 200 mark against dollar once again

• Rupee plunges to 200.06 against the US dollar in the interbank market.
• Downtrend to continue till budget's announcement, IMF loan approval.
• Since start of fiscal year, rupee has collectively dropped by nearly 27%. 

KARACHI: The Pakistani rupee plunged to 200.06 against the US dollar in the interbank market as concerns regarding the upcoming budget 2022-23 and revival of the multibillion-dollar International Monetary Fund (IMF) programme fueled a downtrend.

According to the State Bank of Pakistan (SBP), the local currency shed Rs2.14, or 1.07%, against the greenback on Monday.

The last time the rupee had breached the 200 mark was on May 19, when there was higher uncertainty over the revival of the IMF loan programme than now. The local currency only depreciated after the government hiked the price of petroleum products by a major Rs30 per litre as a result of removing subsidies — one of the main demands of the money lender.

The local currency closed at an all-time high of Rs202 against the US currency on May 26.

Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 26.98% (or Rs42.52) compared to the previous fiscal year’s close at Rs157.54.

The rupee has maintained a downward trend for the last 13 months. It has lost 31.38% (or Rs47.79) to date, compared to the record high of Rs152.27 recorded in May 2021.

Read more: Rupee reverses trend, sheds 0.17% against US dollar

Traders believe caution can be expected this week ahead of the unveiling of the fiscal year 2022-23 federal budget scheduled for June 10 (Friday), with investors expecting IMF conditions of fiscal consolidation to dominate.

Renewed pressure on the rupee on an increase in fiscal-year-end dollar demand from importers and the corporate sector will keep the local currency under pressure.

The report about China’s $2.7 billion deposit placement, meanwhile, has failed to entice traders as they don't see it as useful for fiscal or external support.

Read more: Plan to jack up govt officials' salaries by 5-15% under consideration

Pakistan's foreign exchange reserves decreased by $366 million to $15.7 billion in the week ended June 2. Meanwhile, the State Bank of Pakistan's reserves dropped to $9.72 billion.

Financial expert Asad Rizvi said that credit rating agency Moody's had last week downgraded Pakistan's outlook from stable to negative due to external financing factors, to which the market reacted and the rupee dipped.

The financial expert further added choppy conditions would remain intact until the next fiscal year's budget and the IMF approves the next tranche of loan for Pakistan.