Rupee sinks further, falls to new low against US dollar

• Local unit closes at 287.29 against the US dollar.
• Rupee down 2.25 against greenback in interbank market.
• Importers have resumed the panic buying of US dollars.

Pakistani rupee touched a record low on Tuesday as the country struggles to unlock critical International Monetary Fund (IMF) funding while dwindling foreign exchange reserves become another source of concern for investors.

The local unit, in the interbank market, closed at 287.29 against the US dollar, 0.78%, or Rs2.25, down from Monday’s close of 285.04.

Last month, the rupee hit a record low, closing at Rs285.09 per US dollar on March 2, 2023, the data released by the State Bank of Pakistan (SBP) showed. 

Financial pundits believe that importers have resumed the panic buying of US dollars, while the supply of foreign currency remained low in the interbank market.

Pakistan’s loan programme is yet to materialise months after it raised taxes and energy prices and allowed the currency to depreciate to meet IMF’s conditions. The nation has missed multiple deadlines to resume its bailout. 

The cash-strapped nation secured a $6 billion IMF bailout in 2019. It was topped up with another $1 billion last year to help the country following devastating floods, but the IMF then suspended disbursements in November due to Pakistan's failure to make more progress on fiscal consolidation.

After months-long unfruitful talks, the Washington-based lender has asked Pakistan to seek commitments for new loans from Saudi Arabia and the United Arab Emirates before it revives the bailout.

The IMF’s resident representative for Pakistan said the country has a few more tasks to complete to meet requirements for a $6.5 billion bailout. The lender approved a $3 billion loan program for Sri Lanka last month to ease its economic crisis.

“Uncertainty on IMF and friendly countries inflow affecting rupee,” said Mohammad Sohail, CEO of Topline Securities. 

“Some of the ruling coalition partners are due to visit Saudi Arabia next week and it is a key event to watch,” it added. 

Finance Minister Ishaq Dar will be leading a high-powered delegation to the US which will attend the upcoming annual spring meeting of the Bretton Woods Institutions, known as the IMF and World Bank, from April 10 to 16.

Moreover, the country’s foreign exchange reserves have also declined in recent weeks, which is another source of concern for investors. The forex reserves held by the central bank stand at a critical level of only $4.24 billion (as of March 24, 2023).