The Pakistani rupee was at its lowest today, dropping by 9.6% against the US dollar during the Intra trade day.
The crisis-stricken government of the country relaxed its grip on intraday trade today and let the rupee depreciate as much as possible to win loans from the International Monetary Fund (IMF). This is because Pakistan is currently at risk of defaulting, and the IMF has halted lending $6.5 billion to the country. So, to win back the much-needed funds, Prime Minister Shehbaz Sharif has allowed the rupee to fall. The central bank has also tried to fight the surging prices by raising its interest rates to an incredible 24-year high.
PKR hits an all-time low
The day began with the rupee being at 230.89 against 1 dollar, but things began to change within the first four hours, with the interbank rate losing its value every hour. By 1 pm, the interbank rate was 240.23. However, this did not stop; by the end of the day, the interbank rate was Rs. 255.43. This all-time low beats the previous all-time low of 239.9 in July.
Naveed Vakil, the chief operating officer at AKD Securities Pvt Ltd., said the following about the dollar cap being removed in the open market today:
“Pakistan is showing its willingness and finally conceding to IMF demands to secure funds after a long period of reluctance.”
“The IMF is firmly positioned on Pakistan maintaining a market-based exchange rate, and today’s move has given markets the confidence that officials will now complete the remaining required conditions to continue the IMF program.”
The Pakistani currency’s value decreased by Rs. 32.4 against the Pound Sterling (GBP), Rs. 27.5 against the Euro (EUR), and Rs. 17.9 against the Canadian Dollar (CAD), Rs. 6.5 against the Saudi Riyal (SAR) and Rs. 6.7 against the UAE Dirham (AED) today.
Pakistan and the Dollar Crunch
Pakistan easily got funds from IMF last year due to various reasons. But, this time, the IMF is unwilling to give funds to the country quickly and has delayed any previously planned loans. This has resulted in Pakistan being in a tough spot to keep its economy afloat, and the country’s current situation is only worsening thanks to the political tension, power outages, and tightening of foreign reserves. With the currency drop and the KSE-100 Index rising 2.7%, the nation is willing to do whatever it takes to win back the IMF funds.
Moreover, this is not the end of the currency dropping in the open market as Pakistan’s money exchange companies have officially removed all the limits on the dollar rupee rate. The plan is to let PKR drop as much over the next few months.
Muhammad Sohail, the CEO of Topline Securities, has also shared his viewpoint about what to expect with the PKR drop. He said:
“Now black market rate will come closer to the Bank rate. This will help in increasing exports and inward remittances through the banking channel. This may also help in reviving the delayed 9th review with IMF and inflows from friendly nations.”
The rupee is expected to become 260 a dollar in the upcoming days to increase the country’s dollar reserves and improve its situation.