Rupee falls to a record low as import pressure increases
KARACHI: In the interbank market on Tuesday, the value of the Pakistani rupee fell to a new historic low of Rs299 versus the US dollar, increasing the cost of imports and increasing the amount of money needed to pay off foreign debt.
Data from the State Bank of Pakistan (SBP) show that the value of the rupee decreased relative to the dollar by 0.63%, or Rs1.88, to Rs299.01. Shahid Ali Habib, CEO of Arif Habib Limited, stated in an interview with The Express Tribune that the rising demand for US dollars to pay up import backlogs put pressure on the rupee.
In addition, he added, “additional demand is coming from…resumption of outstanding payments to the foreign airlines operating in Pakistan and the repatriation of dividend income by foreign investors to their headquarters abroad.”
Due to a foreign exchange crisis, such payments had previously partially ceased. After combined inflows of $4.2 billion from the International Monetary Fund (IMF) and friendly countries in June and July 2023, foreign exchange reserves have improved to two months’ worth of import coverage at about $8 billion.
The fact that the dollar has been rising against other currencies throughout the world has contributed to the currency’s decline to a historic low. In order to take advantage of the rising rate of return, international portfolio investors put huge sums of money into US treasury notes, sending the US dollar surging to more than two-month highs.
Only eight paisa separate the current rupee low from the previous low of Rs298.93/$ reached in May 2023 following the imprisonment of former prime minister Imran Khan and the ensuing deterioration of the law and order situation.
Published in EDP BLOGS on August 23,2023.
