The Pakistani currency surpassed Rs270 against US dollar for the first time at noon on Monday in the interbank market as the government surrendered its control over the exchange rate to satisfy IMF demands.
The currency was freshly devalued by Rs7.50 (or 2.77%) to a new all-time low at Rs270.10 against the US dollar on the third consecutive day of freefall.
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The domestic currency had closed at Rs262.60 on Friday, according to the central bank.
Cumulatively, it has slumped by Rs39.21 (or 14.50%) in the three days to date compared to Wednesday’s close at Rs230.89.
“The wide gap between demand and supply of the greenback in the system pushed importers to pay Rs270 per dollar,” KASB Securities Head of Research Yousuf Rahman said while talking to The Express Tribune.
He added the rupee was expected to “test the level of 270”. “It might maintain the downward streak.” However, the local rupee is expected to stabilise at around Rs265 this week, he maintained.
The gap between the demand and supply of greenback has widened significantly due to the low availability of the dollars in the system, he explained.
The country’s foreign exchange reserves have depleted to an alarming level of $3.7 billion. They are barely enough for three weeks import requirement. The reserves stood at $20 billion in August 2021.
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On the other hand, Pakistan’s import payment requirements stand at around $5 billion a month. Besides, the nation is due to repay $7 billion in foreign debt in the next 5 months (Feb-Jun 2023).
The government reinstated the market-based exchange rate mechanism to win back the IMF’s $7 billion loan programme.
The revival of the programme is expected to help convince multilateral and bilateral creditors to lend a fresh $3-4 billion over the next couple of months.
The new debt inflows would help the government to overcome the shortfall of US dollars in the system and hopefully narrowly escape default on international payments.