A new low for Pakistan’s rupee

Pakistan’s rupee ended at 169.97 against the US dollar in the inter-bank market on Tuesday, a new all-time low as the currency’s slide continued to rattle the market as well as policymakers.

As per the State Bank of Pakistan (SBP), the rupee declined another 37 paisas or 0.22% to finish at 169.97, even crossing the 170 level in intra-day trading.

The PKR has depreciated 10.41% since its recent high in May amid overwhelming growth in the import bill that has put severe pressure on the local currency.

In recent days, a series of measures have been notified to arrest the rupee’s decline, including mandating banks to share a five-day schedule of upcoming import payments, revising it upwards from the earlier two-day directive, and directing them to seek permission for imports that are valued at $500,000 per transaction, cutting in half the original payment ceiling of $1 million. The SBP has also introduced curbs on auto financing.

“The stance of the government and the central bank is quite clear,” Tahir Abbas, Head of Research at Arif Habib Limited, told PEN.

“Both have taken proactive measures. This would prove beneficial for long-term sustainable growth.”

Pakistan’s current account deficit for August 2021 alone clocked in at $1.5 billion, a 88% growth in a single month, while the import figure hit $6.6 billion.

Abbas said that the situation is likely to improve after talks with the International Monetary Fund (IMF) next month. Furthermore, stability in Afghanistan would also help reduce the pressure, especially as its central bank becomes operational.

Abbas was, however, concerned over the rising commodity prices in the global markets amid demand revival after the pandemic. “This is a concerning issue for a net importer like Pakistan,” he added.