KARACHI : The months-old speculation, that the rupee would weaken to Rs160-165 against the US dollar by the time Pakistan formally enters the IMF loan programme, came true on Wednesday.
The rupee weakened 3.3%, or Rs5.18, in a single day and closed at an all-time low of Rs162.16 to the US dollar in the inter-bank market compared to Tuesday’s close of Rs156.98, the State Bank of Pakistan (SBP) reported.
Earlier, the rupee hit an intra-day low at Rs164.50, according to market sources.
The market speculated that the rupee would drop to Rs160-165 when the IMF team visited Islamabad in March 2019.
“The rupee was hovering around Rs139-140 when the IMF team arrived in March 2019,” Forex Association of Pakistan (FAP) President Malik Bostan recalled. BankIslami President and CEO Syed Amir Ali was of the view that “stability will return to the currency market after Pakistan formally enters the IMF loan programme.”
The IMF executive board is scheduled to meet next Wednesday (July 3) to consider Pakistan’s loan programme worth $6 billion after Islamabad agreed to meet all the commitments made to the fund in a staff-level agreement in May 2019. Government officials, including Adviser to PM on Finance Dr Abdul Hafeez Shaikh, however, have denied several times that the government have agreed to any fixed rupee-dollar parity under the IMF programme.
The commitment the government made was that it would end state control of the rupee and let market forces – which mostly comprise banks – decide the rupee-dollar parity keeping in view the demand and supply of dollars.
The rupee has so far lost 9.62%, or Rs14.24, in the current month. Since the beginning of outgoing fiscal year, the rupee has cumulatively dropped 33.5%, or Rs40.67, from Rs121.49 on first working day of the year on July 3, 2018.
“The rupee came under pressure apparently due to (large) foreign debt repayments before the current fiscal year ends on June 30, 2019,” said Topline Securities CEO Muhammad Sohail.
The massive depreciation of the rupee prompted the gold pricing committee of the All Sindh Saraf and Jewellers Association (ASSJA) to increase the price of the precious metal by Rs500 to a new all-time high at Rs81,000 per tola (11.66 grams) on Wednesday.
The increase came despite a significant drop of $25 to $1,404 per ounce (31.10 grams) in the London gold market.