The US dollar continued its upward move on Monday against the local currency during early morning trade at the interbank market.
According to the Forex Association of Pakistan (FAP), the rupee rose by Rs 2.55 against the dollar to hit an all-time low of Rs 210.3 from Friday’s closing level of Rs 207.75. The greenback was trading at Rs 212 in the open market till 10:30 am.
Said bin Nasser, Director of Metis Global don.com That the first day of the week kept pressure on the rupee due to the news of banks running out of dollars over the weekend.
“The dollar shortage at banks resulted in low or negative swap premiums as the country’s foreign exchange reserves continue to dry up,” he pointed out.
Nasser said a revival of the loan program from the IMF or updates on inflows from China could help stabilize the exchange rate.
read more, No agreement yet with IMF for revival of loan program
According to web-based financial data and analytics portal Metis Global, the rupee suffered a massive loss of Rs 6.4 during five consecutive sessions last week.
Market experts have called for the government’s immediate attention to the depreciation of the rupee with regard to reducing import bills through cutting unnecessary expenses, warning that otherwise, the deal with the International Monetary Fund (IMF) would be jeopardized. In the absence, Pakistan’s foreign exchange reserves will deplete.
Meanwhile, Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, said the market is in serious trouble but officials seem oblivious to it. “It seems like another condition placed by the IMF is the devaluation of the rupee because nobody cares about it and there is silence everywhere.”
He cautioned that if this trend continues, Pakistan could be headed for a lapse like Sri Lanka. “It is very important for the government to act or else the country will default.”
Earlier today, in a weekly overview, local financial portal Tracemark said the rupee’s plight was compounded by extremely low levels of foreign exchange reserves.
According to SBP, Pakistan’s reserves have fallen by $ 234 million to just under $ 15 billion. The central bank’s share in these reserves is just under $9 billion.
“With almost no free liquidity, it is expected that central banks do not have the resources to control the market,” it pointed out. “With low levels of inflows and substantial outflows, especially at the end of June, SBP is reducing the share of commercial bank reserves to square payments, resulting in a low or negative swap premium.”
Keeping this in mind, this process continued, no one could stop the rupee from further loss.
“On an average, it (the market) is losing Re 1 every day and will stop only when Pakistan receives fresh inflows. If we assume that the inflows will be from the IMF, the government will have to put all its resources on board the IMF. Gotta focus. And jump in the queue because we can’t even give another week [like this]”Overview added.